Back in early 2022, there were high hopes that sanctions against Russia would cripple its economy. Those predictions did not come true. The latest article on The Economist shows why:
Before 2022, Kazakhstan sold small electrical equipment to Russia. After the invasion of Ukraine, Kazakh exports increased more than 7 times. How was Kazakhstan able to increase productivity so quickly? Note that at the same time this is happening, Kazakh imports of electrical equipment from the EU are also increasing significantly. It is very clear that Russia has been using this former Soviet republic as a way to avoid sanctions.
For European policy makers, this is all bad news. “We were expecting some leaks,” said one official, “but not to the extent we know now.” In December, the euThe 12th round of restrictions targeted firms in Armenia and Uzbekistan for the first time. Bureaucrats have since threatened more sanctions against third countries and European exporters, but have only taken action against a few firms. For each company added to the blacklist, another is registered elsewhere.
A similar problem occurs when countries try to diversify their supply chains. The US imposes higher tariffs on Chinese exports to reduce our dependence on that economy. As a result, US imports from neighboring countries such as Vietnam increased significantly. Not surprisingly, Vietnamese imports from China increased at the same time. We still buy a lot of things from China, but in a more circular way with higher transportation costs.
None of this is to say that sanctions are necessarily a bad idea. It is clear that the sanctions on Russia have slightly reduced its fighting power. Rather, the point is that we should not expect sanctions to be ineffective.
PS. After writing this post, I realized another example:
Interestingly, the US media blames China but not Germany for helping the Russian war machine.
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