Russia Ukraine Crisis: Why Russia?

Unfortunately, this war seems to be another mistake of the west after their hasty withdrawal from Afghanistan leaving behind a humanitarian crisis. The Ukraine-Russia war is leading to reshaping world politics with the emergence of new world order, writes Dr. Farah Naz, an Assistant Professor in the Department of Government and Public Policy at the National University of Sciences and Technology

How to prevent World War 3

In the emerging global world order, there are three players: the US, China and Russia. Indeed the US is a superpower with the strongest economy. But the size of the Russian economy is $1.71 trillion while China’s is $19.9 trillion. With this, Russia is ranked number 11 while China is the second-largest economy. These numbers suggest that it is hard for the US to corner China upfront with war tactics but Russia being economically less powerful in comparison to China can easily be targeted. Hence, the US came up with the ‘bleed Russia’ policy. Here the question is how the US can bleed Russia?

To better understand this conflict, we must adhere to some historical facts because the issue of the Ukraine invasion is not an abrupt measure; it brings along a long history of the Berlin Wall in 1989. Where the parties involved came to an agreement that NATO will not expand to the Russian eastern border. Ukraine becoming a member of NATO is considered a direct violation of the earlier agreement that Russia set as a red line and a threat to its national security. Therefore, Russian concerns were clear to the west since 1989.

Then why was NATO so determined to expand?

NATO expansion was meant to provoke Russia and in February 2022, Russia was further coerced to invade Ukraine. Though Russia kept preferring to solve the issue through negotiations. But looked like the west was least interested in negotiations as negotiations were against the US bleed Russia policy objectives. Post invasion, Russia faced serious sanctions by the US and its NATO allies. In six rounds more than 4000 sanctions were imposed due to which Russia faced deepening isolation in the global world. Looks like it’s not a war between Ukraine and Russia but an economic and financial war on Russia by the US via NATO. The major goal is to isolate Russia financially. Initially, the Russian banking sector was deeply affected by the removal of the SWIFT facility. But how effective were those sanctions?

Trade agreements face crippling consequences with a ban on oil and gas by the US and its European allies. The key destination for Russia’s energy exports in 2021 for crude oil and condensate: OECD Europe 49%, Asia and Oceania 38% while the rest of the world 13%. For natural gas OECD Europe 74%, Asia and Oceania 13% while the rest of the world 13%. The above numbers suggest that Europe is dependent on Russia for its energy needs.

This is one of the major reasons that Europe has yet not implemented a complete ban on the Russian export of gas. They need an alternate means to ban Russian gas completely. But unfortunately, those alternate means such as a) the US to supply an additional 15 billion cubic meters of gas by the end of 2022 but that will be only sufficient for 1/10th of Europe’s requirement; b) the US could supply 50 billion cubic meters of gas by 2030 which requires time; c) to use other renewable sources such as wind energy Europe require time. But do Europeans have this much time to wait for alternative energy sources? The simple answer is no.

The story is not limited to Europe alone many countries are dependent on Russian gas such as North Macedonia 100%, Bosnia & Herzegovina 100%, Finland 90%, Latvia 90%, Bulgaria 90%, Serbia 89%, Poland 53%, Italy 46%, Germany 43%, France 25%, Belarus 19%, Turkey 16%, etc. The global oil prices are currently hovering in the range of $105-112 bbl. The US has asked its allies to release 30-50 million bbls more in the market. But it is not in the best interest of OPEC Plus. Hence they never agreed. In desperation, the US relaxed Venezuela’s oil sanctions but with sanctions relaxation, Venezuela largely started selling oil to China.

Unfortunately, the cost of the NATO expansion to the Russian eastern border is more lethal and costly not only for Ukraine but the entire world. In the times to come the world will face energy, food and humanitarian crises. Energy issue bells the warning rings for many countries – in this global environment can the world afford to continue this war? If not then why this war?

If they aimed to weaken the Ruble then instead of getting weak it has strengthened

Russia’s account surplus hit $58.2 billion in the first quarter (Jan-march) of 2022. This is a three-decade high as compared with $22.5 billion in the same period last year. Though Russian exports have plunged, the Ruble has skyrocketed. But how?

The US goal was to weaken Russia’s economy and ultimately its national security. But, (according to Dr Ashfaque Hassan Khan’s lecture) Russia took the following measures to fight back: 1) the Central Bank of Russia injected $1.0 billion into the market on the day of invasion to sustain its currency; 2) Central Bank raised its benchmark interest rate from 9.5% to 20% on February 2022; 3) set a limit on withdrawal in foreign currency; 4) imposed capital control and a complete ban on foreigners selling securities; 5) banned transferring foreign currency abroad; 6) Central Bank announced gold purchasing at a fixed price of Rub 5000 per gram; 7) unfriendly countries were asked to pay in Rubles for oil and gas; 8) Russian exporters were asked to earn foreign currency and convert up to 80% in Rubles.

Resultantly, the Ruble gained strength. On February 24, 2022, the Ruble Dollar parity was 79.7 per USD. Two weeks after the invasion the Ruble went as low as 151 per USD. Which created a huge panic but Russia came up with the above plan to regain Ruble’s strength. Currently, Ruble 54 is per USD much stronger than before. Then the goal of the US seems to be not achievable.

However, the conflict left Ukraine with 60% damaged infrastructure, 20% of its territory under Russian control, 12 million IDPs, and 6 million refugees. The impact of the Ukraine-Russia crisis also affected Europe and the world with energy shortages, emerging food crises, and humanitarian issues. But is this war worth the cost to all states particularly whatever the Ukrainian citizens are paying?

Unfortunately, this war seems to be another mistake of the west after their hasty withdrawal from Afghanistan leaving behind a humanitarian crisis. The Ukraine-Russia war is leading to reshaping world politics with the emergence of new world order.

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