The West’s Russia Sanctions Could Lead to Many Unpredictable and Unpleasant Outcomes
Global supply shocks are historically rare events. All the more extraordinary to have two such shocks in quick succession—the second arriving even before the first has entirely faded away. That is what the world now experiences in the form of the Great Pandemic followed by the Great West-Russia economic war. The most visible symptom of the supply disruption is the sky-high price of energy and a range of other commodities.
What Is the Effect of Sanctions?
The waging of a long and all-out military war usually, if not always, exerts a toll in terms of surging prices. But what about economic war waged through Western sanctions by states not simultaneously engaged in direct military conflict? The laboratory of history for such warfare is small. Indeed, there is no experience with which usefully to compare the West’s economic war against Russia in the present. There are grounds to think that there will be serious long-term price-inflation-fueled damage on the perpetrators. (The consequences of price increases for the country on the receiving end of sanctions is a subject for another day).
Let’s take one step back to consider what is new about the nature of this economic war.
First, it started as a clear threat by the USA and its main European allies. Spelled out in all its menacing detail, albeit with some ambiguity at the start, aimed at deterring a Russian invasion of Ukraine. It failed in that first objective. Both the economic war and the military war are now in a “dig-in” phase. A snapshot of the dominant view at present in the marketplace is that the Russia’s military campaign will reach a “permanent ceasefire stage” long before the effective end of the economic war.
Sanctions Are Very Broad
Second, this economic war’s scope is unbounded. The campaign plan in the present dig-in phase is apparently to “close down” large parts of
Article from Mises Wire
