Senior economic and political Analyst
War always brings hunger, deaths, displacement, poverty and destruction. It is the duty of world’s policy makers and influential ones to promote peace, harmony and negotiations. United States and European were widely indulged in war mongering, arms supply and closed their eyes from atrocities, planned and organized genocides by Israelis against Palestinians and Indians against Muslim minorities and people of Kashmir. Both EU and USA supported the bloodshed in Vietnam, Afghanistan and Iraq. They have dual standard and this dual standard is jeopardizing global peace and stability.
In response to Russia and Ukraine conflict European Union and United States of America imposed sanctions on Russia. The EU adopted five packages of sanctions. The measures are designed to individual sanctions, restrictions on media, diplomatic measures, and restrictions on economic relations with the controlled areas of Donetsk oblasts. These sanctions were imposed on 23rd February, 2022. After February 24, 2022 the EU massively expanded the sanctions. On 8th April, EU banned on import of coal from Russia. It has full ban and an asset freeze on four Russian banks.
These sanctions as there are general impression that hit Russian economy badly but the other side of coin is that it also hit the EU economy very badly. EU Was hardly recovered from Covid Pandemic which left private consumption and investment well below pre-covid forecast even as fiscal and monetary support underpinned an impressive rebound in employment almost to levels last seen before the pandemic. Spiking energy and food prices are now cutting deeply into household consumption and economic uncertainty is poised to restrain investment. Latest regional economic outlook lowers the growth forecasts for Europe. For advanced economy growth projections cut by one percent point to 3% in 2022, Inflation will increase 5.5% in advanced economies and 9.3% in emerging European economies. Oil prices are increasing which is severely damaging the growth targets and making the life in Europe miserable. In the Euro area, inflation reached 7.4% in March, the highest level since the introduction of the single currency. Four countries are facing double digit inflation in euro area core energy prices, which reached almost 45%. Sanctions against Russia badly affected global supply chain. Consumer confidence has dropped remarkably since the sanctions are imposed. In Europe 90 % gas consumed is imported and Russia provides half. Russia also accounts 27% of oil and 46% of coal imports. Defence spending going to rise significantly which will further exacerbate the situation and would be a great burden on economy. Many European companies like McDonald, Ikea left Russia which reduced their revenue significantly.
European Union and Russian conflict economists have defined as “the third asymmetric shock” that Europe had experienced in the last two decades after 2008 financial and economic crisis and the covid 19 pandemic. This crisis will also spell out the end of globalization and it is going to might reshape alliances. EU is going to review protectionism similar will do USA. Russia Ukraine conflict has already created economic disruption and increased poverty, food , insecurity and inflation for beyond Eastern Europe. Ukraine grows enough food to feed 400 million people world-wide which include 50% of the world’s sunflower oil supply,10% of the worldwide grain supply, and 13% of the global corn supply. This food supply chain disruption has badly affected many European countries. Food prices already soared in Germany, UK and other countries. On 31st March, 2022 Vladimir Putin ordered the gas export to Europe should be paid in Rubles instead of euros. Demand to pay in rubles can lead to bypass the euro or dollar financial system and therefore continue to feed Russian State finance. Germany is worst hit by Ukraine war and cannot afford sanctions against Russia. Germany’s investor’s sentiments fell to its lowest level since the start of covid 19 pandemic. The Zew Research Institute disclosed that economic sentiments index recorded the biggest decline in the 31st year history of its monthly poll of investors, reflecting fears that EU’s biggest economy could hit by a recession and soaring inflation as a result of sanctions against Russia and Ukraine war soaring energy prices and waning confidence and threatening to derail the what promised to be a second strong year of economic recovery from the covid 19 pandemic in Europe.
In UK alone inflation and price hike made the lives of people miserable and many people are forced to abandon one time meals. Many families to save their electricity bills they are spending time in cheap restaurants. According to one survey 52% people stopped to meet with their friends. 44 % reduced driving their cars.
The German economy is at risk of shrinking nearly 2% this year if the war in Ukraine escalates and an embargo on Russian coal, oil and gas leads to restrictions on power providers and industry, according to the Bundesbank.
The estimate translates into a hit to output of about 5 percentage points compared to a March baseline, Germany’s central bank said in its monthly report.
Looking 25 years out, it is estimated that 80% of the EU’s natural gas will be imported, with Russia providing up to 60%, equating to one fifth of the overall EU energy mix coming from Russia in the form of pipeline natural gas. This figure does not include the energy the EU will import from Russia in the form of oil, which is estimated to be as much as another one-tenth of the total energy mix. Thus, as the world’s major price-setter for natural gas, Russia— supplying one-third of the EU’s energy in 2030—will be in a position to use its energy supplies as levers of control by dictating terms. The negotiations that transpired with Ukraine at beginning of 2006 and with Belarus in the closing days of 2006 show the huge economic and political leverage Russia commands with countries dependent on its energy.
A common phrase that is often repeated in European political discussion is “the EU and Russia are mutually dependent on one another respectively as buyer and supplier of energy.
Europe’s biggest imports of Russian oil barrels per day in 2020
|S.No||Country||Import of Russia oil barrel 2020 per day|
In a nut and shell it is a lesson from History that war and sanctions are not viable solutions. EU and USA imposed sanctions against Iran but it not only survived but enabled itself to produce many of its requirements while Russia is a world power and imposing sanctions against it would not bring positive results rather it would increase unemployment amongst EU ranks. It is therefore it needed to start dialogue with Russia and to find the solution of the problem otherwise historians raise questions and record them why such sanctions had not been imposed on Israel which was busy in genocide of Palestinians and India was committing same crime of genocide of Kashmiris while EU and USA were fully supporting them. Same why not EU reacted when USA and its Allies invaded Vietnam and Iraq. Such dual standard would not bring any positive results.
The writer is a research scholar, columnist, author of many books and senior research editor at The Newslark, Karachi.