It’s Going to Take Years to Know How Much We Are Destroying the Russian Economy
For those doubters who question the power of sanctions, I’d suggest a reality check. First, we are only four weeks into this war and even the most draconian sanctions take time. It’s a very slow motion explosion, but when it goes off, there’s no going back.
We are ruining their credit system. Russian banks are setting loan rates at 20%. The ruble plunged, then went back up, but it is headed even deeper into worthlessness. Financial instruments like the value of currency seldom move in big leaps. That kind of thing is driven by speculation, and a seesawing in the ruble pretty much means it is now seen as a speculative investment. That is to say, not a stable investment.
I’ve already written about what the effect of blocking plane parts imports will have on a country where flying is practically essential to doing business. Planes are not cars or trucks. If a part fails it can be catastrophic. Russia knows this because as soon as we stopped the import of parts, the government seized planes leased from the West, presumably to cannibalize them for parts. This cost western companies a fortune, but war has a price.
The question of China bailing them out has apparently been put on hold because the Chinese are not stupid. They can’t see how this is going to play out, but they know it can’t be good. One story floating around is that this war has set back China’s planned invasion of Taiwan by four years.
India is a major financial partner with Russia and they have held off on criticizing the war, but internally supporting Russia is not popular. The question is whether a major economy can afford to be ostracized from the rest of the world. China and India cannot afford that.
Russia was positioned to be a major weapons supplier to the Middle East. But now that we see that their vaunted tanks and aircraft cannot stand up to partisans with modern anti-tank missiles and anti-aircraft weapons, suddenly those state of the art old school weapons don’t have the same appeal.
There are literally dozens of emerging stories of the effects of sanctions, as they start to achieve their long term effects. And, as I…