Contours of the new world after Operation Z

INSTITUTE FOR INTERNATIONAL POLITICAL AND ECONOMIC STRATEGIES

The limited military operation to denazify and demilitarise Ukraine, which began on February 24, 2022, despite its local scale, will be the starting point of the “new world”.

In the last century, major shifts in geopolitics, finance, power centres, and logistics required world wars to resolve accumulated contradictions. In the 21st century, the contradictions turned out to be so deep that a limited conflict in a third-world country in terms of its complex potential was enough for a domino effect. The limited military operations were offset by a hypertrophied economic response.

Today, the masks are completely discarded. Western countries, led by the United States, have introduced an extensive sanctions package against Russia, which literally includes everything – restrictions against Russian banks, cats, pop performers, civil aviation, esports players, movie fans, IKEA customers, the defence industry, oil refining, Paralympic athletes and much more. And this is not counting the confiscations of Russian gold reserves, yachts and other property of Russian oligarchs, which are not supported by any precedent or legal framework.

The sanctions imposed will certainly have an effect on the Russian economy, if only because of their mass character. However, the obvious ill-considered nature of the sanctions imposed makes their consequences inevitable, which were clearly not calculated by the initiators. Russia is the largest geopolitical player, and it is extremely difficult to deal damage without getting a ricochet. In some cases, even more devastating than the actual strike.

The situation with the “total economic and financial war against Russia” – this is how French Finance Minister Le Maire described what is happening – is dynamic. Although the intensity of the introduction of sanctions, which it would be more correct to call “economic attacks”, has decreased, but their list is constantly growing. In addition, Russia has not yet responded on a large scale with its own measures, the potential for which, of course, is there. But even now we can say that for the next 10-20 years, the whole world is plunging into a deep crisis, in which the main victim will be the global liberal system, and one of the main beneficiaries will be China.

Russia will have to live in the new conditions of Cold War 2.0, when a number of world institutions that seemed unshakable for 30 years no longer exist formally or in fact. We will have to convert the remaining oil and gas revenues into a large-scale modernisation of all other sectors of the economy, including commodity logistics, moving to maximum import substitution and general internal consolidation.

And there is one paradox here. If economically today we are in the early 1930s – we still have time to prepare for a more intense war with the West, much more complex and brutal than the Cold War, then politically we are in 1929 – politically today is actually a pre-war state that can enter into an open phase at almost any time the moment.

Oil and gas without much change

Economic ties between Russia and the West will be seriously reduced in the near future, although their energy base will remain the same. The Russian energy sector will suffer from sanctions and restrictions to a minimal extent – both in terms of maintaining export volumes in the medium term, and in terms of preserving technological competencies.

By the decision of German Chancellor Olaf Scholz, after Russia recognised the sovereignty of the DPR and LPR, on February 22, 2022, the certification of the Nord Stream 2 gas pipeline operator Nord Stream 2 AG was suspended. Later, German Foreign Minister Annalena Baerbock clarified that the gas pipeline project was “frozen”. It can be completely stopped, German Economy Minister and Vice-Chancellor Robert Habeck said on February 23.

A number of Western companies announced the termination of participation in projects on the territory of the Russian Federation. BP, Shell and ExxonMobil are planning to leave – which will be associated with large losses for them. BP may lose $25 billion, while Shell projects are estimated to cost $3 billion. The exit of Norway’s “Equinor” means a loss of $1.2 billion.

A special position was taken by the French “Total Energies”, which announced that it will stop providing capital for new projects in Russia, but will not leave the country. It is worth noting that despite the bellicose rhetoric, the actual policy of France is aimed at the “quiet” preservation and even development of cooperation.

Such decisions of the European authorities and corporations had a very negative impact on exchange prices, giving a new impetus to the growth of spot prices for gas and oil.

On March 4, according to the London ICE Exchange, the price of natural gas in Europe exceeded $2,400 per thousand cubic meters, breaking an absolute record in history. According to analysts at JPMorgan, by the end of the year, benchmark Brent crude may cost $185 per barrel.

Such a price is possible if there are still violations in the supply of raw materials from Russia – in addition to the general panic atmosphere, there were difficulties with the export of Russian oil from the ports of the Baltic and Black Sea. Some shipowners fear that they will face reprisals for working with Russia.

“I thought that sanctions were imposed on Russia until I went to a gas station,” Paolo Savona, an Italian economist, former Minister of Industry and current head of the National Commission of Joint-Stock Companies and the Stock Exchange, wrote on Twitter on March 5.

On March 4, the cost of a litre of gasoline at a serviced gas station in Italy exceeded €2 on March 4, breaking an important psychological mark for the local market. According to the national business association “Confcommercio”, the total expenditure growth of Italian service companies will be 160% compared to 2021.

During the year, the cost of gas for Italian consumers has almost doubled (from 70 cents to €1.37 per cubic meter), the cost of electricity — more than doubled (from 20 to 46 cents per kWh), which puts thousands of companies on the verge of profitability. In 2021-2022, the authorities have already allocated more than €10 billion to “amortise tariff growth” for citizens and businesses, according to some forecasts, price shocks will require up to €20 billion for Italy alone.

BP may lose $25 billion, while Shell projects are estimated to cost $3 billion. The exit of Norway’s “Equinor” means a loss of $1.2 billion.

These losses are several times higher than the damage that Gazprom suffered due to the suspension of the Nord Stream 2 project. Considering the project from the point of view of profitability, high gas prices have already allowed Gazprom to recoup the construction of the gas pipeline by 2-3-fold. In addition, Germany is likely to face lawsuits from participants in the Nord Stream 2 consortium – British Shell, Austrian OMV, French Engie, German Uniper and Wintershall Dea.

According to “Gas Infrastructure Europe”, as of February 26, the EU fully used the natural gas reserves pumped in the summer of 2021. The volume of active gas in European underground storage facilities decreased by 21.5% compared to last season, or by 7.9 billion cubic meters. Underground gas storage facilities in Germany were used by 70.6%, and in France – by 77.1%.

The fullness of Ukrainian underground gas storage facilities is also at minimum levels. As of the same date, reserves totalled 10.3 billion cubic meters, which is 44% less than last year’s level (or 8.1 billion cubic meters).

To replenish gas reserves in its underground storage facilities by next winter, the EU will need to pump such significant volumes of gas that have never been pumped in one summer season before, Gazprom said.

If the supply of Russian coal or gas is cut off, the upcoming winter will be problematic for Germany, German Vice-Chancellor, Minister for Economic Affairs and Climate Protection Robert Habeck warned in an interview with the ZDF TV channel. “We can get through the spring and summer well, but I’m still a little worried about next winter,” the official said.

It is important to emphasise that the limited military operation in Ukraine has created a new risk factor that raises gas prices. The Ukrainian gas transmission system is not under attack by Russian or Ukrainian forces, but there is no guarantee that the Ukrainian nationalists, driven to desperation by the deterioration of the situation at the front, will not blow up the pipeline, or it will suffer from unintentional fire.

Given the rapidly emptying storage facilities, the EU economy faces “energy poverty” and an imminent crisis. The Russian side may face a lack of technical ability to supply gas for export in the European direction.

To a certain extent, this risk can be compensated by Germany’s prompt resumption of certification of the Nord Stream 2 operator – despite the information campaign, the project has not yet been completely stopped. The entire infrastructure is ready for launch, which requires only the political will of Germany, and the solution of this issue is now beyond the Russian competence. We should expect to open up additional opportunities for Russian LNG supplies.

High gas prices in the EU and around the world will continue for the coming months, or even years. RUSSTRAT material dealt in detail with the question of the failure of the idea of “replacing” Russian gas with analogues, which implies the stability of demand for Russian gas in the EU.

The EU energy sector is facing serious turbulence, primarily due to the lack of attempts to compensate for the rapid increase in prices on the open market that began in the autumn of 2021. The course announced by the European bureaucracy to simultaneously liberalise the market and the “green transition” to renewable energy, which was not provided with technological solutions, led to a complete market imbalance in December-January.

In the medium term, even excluding force majeure situations related to the fighting in Ukraine, high gas prices will lead to a deterioration in the competitiveness of European industry in a broad sense-from fertiliser production to steel and plastic.

It is necessary to take into account the possibility of sabotage of Ukraine’s gas transit system (GTS) after the military and then political phases of the special operation are completed. In this regard, the earliest possible implementation of gas pipelines passing through Mongolia to China becomes a priority, which will compensate for the likely blocking of gas volumes reserved for supplies to the EU through the Ukrainian GTS.

The situation with the sanctions directed against Russian oil production and refining looks equally contradictory in terms of design and execution. On March 6, the US Treasury Department issued detailed instructions on how to purchase oil from Russia to circumvent the sanctions imposed by the US government.

The agency explains that the imposed financial sanctions against Russian banks are not all-encompassing, the ability to work through other banks remains. It is noted that companies need to use “bypass transactions”, including using banks in third countries, where funds would be received in US dollars, and from there would be transferred to the accounts of Russian companies, including in sub-sanctioned banks. It turned out that the US Treasury also recommends working with wood, coal, uranium and refined products in this way.

The ban on European technologies for oil refining, which was announced on February 25 by the head of the European Commission (EC) Ursula von der Leyen, according to Brussels, will not allow Russia to modernise refineries. In this part, the risks can be assessed as moderate – the main peak of the modernisation of Russian refineries occurred in 2010-2019, in addition, European technologies are not unique.

Russian companies have their own technology school, and a number of ready-made solutions can be obtained in China. In the long run, due to the lack of imported components, difficulties may arise with major repairs and maintenance of equipment already operating at Russian refineries, including software support.

The organisation of “grey” supply schemes for imported components, an increase in the export of necessary spare parts from China, as well as the intensification of its own import substitution in this part can reduce the severity of the problem.

The main and almost only

The China factor in general will play a very big role for Russia in the near future. China will be an indispensable partner for the Russian Federation in a huge area, from financial payments to the supply of necessary spare parts, consumer electronics, medical equipment, etc.

On Saturday (March 5, 2022), the operators of the global bank payment networks Mastercard and Visa announced the suspension of international transactions in relation to Russia.

“Cards issued by Russian banks will no longer be supported by the Mastercard network. And any Mastercard issued outside the country will not work in Russian stores or ATMs,” Mastercard said in a statement.

In a statement, Visa said that “all transactions initiated with Visa cards issued in Russia will no longer work outside the country, and any Visa cards issued by financial institutions outside of Russia will no longer work in the Russian Federation”.

All cards of these payment systems already issued by Russian banks will continue to operate in Russia in the same mode, thanks to the National Payment Card System.

This prompted the search for alternative systems. Tinkoff, Alfa-Bank, Sberbank, Raiffeisenbank and, apparently, many other Russian banks are considering issuing UnionPay cards in the near future, which can be used to pay for purchases and withdraw cash abroad.

Founded in 2002, China’s UnionPay, although less popular than Visa and Mastercard, is an efficient international payment system. The countries where Union Pay operates include Switzerland, Greece, Italy, Spain, Germany, Mexico, Cyprus, Thailand, India, Israel, Portugal, Croatia, Poland, Serbia, Hungary, Austria – a total of 180 countries.

The technical inability to make international payments with anything other than UnionPay, and the disconnection of a number of Russian banks from the SWIFT system of international banking messages will lead to the transfer of Russian Visa and Mastercard users to UnionPay. In the future, we should expect a new increase in the influence of the Chinese payment system in the Central Asian countries, which are a source of labour migration to Russia.

We should expect a change in the structure of the Russian car market, which Volkswagen, Porsche, BMW, Audi, Skoda, Jaguar, Land Rover, Mercedes-Benz, General Motors, Volvo and Citroen left. German truck manufacturer Daimler, as well as the Mercedes-Benz Group, intends to sell its 15% stake in KAMAZ. The manufacturer of Harley Davidson motorcycles has stopped supplying motorcycles to Russia.

The complex dependence of the Russian automotive industry and the automotive segment of the consumer market on China will certainly increase. Separate assembly plants of the Chinese automobile industry (Haval) already exist in Russia, and there is reason to expect their expansion.

In recent years, the Chinese auto industry has seriously improved the quality of manufacturing, and in general, Chinese cars correspond to the budget categories of European production. The self-exclusion of European and American manufacturers creates an exceptionally favourable situation for China in the large and solvent Russian market, which can be called a monopoly by a number of parameters.

The auto parts market is becoming almost entirely Chinese – popular car brands in Russia are sold and assembled in China, too, and often with a greater degree of localisation. China has expertise and experience in the production of spare parts and even fully finished cars. Given the current realities, European and American companies that have left Russia do not have the tools to prevent such deliveries from China to Russia.

In recent years, China has been very actively replacing European supplies in a number of segments of the Russian market related to the supply of components, industrial equipment, etc. Given the de facto trade blockade declared by the EU, China has a chance to become Russia’s main trading partner this year.

According to current data announced on March 7 by the Chinese customs, the trade turnover between Russia and China for the first 2 months of 2022 increased by 38.5%, amounting to $26.431 billion. At the same time, China’s trade with the United States grew by 12.3%.

The decision taken by European companies that produce equipment for industry to stop operating in Russia was also a gift for China. It will be very difficult for companies that produce finished furniture to return to the Russian market, for example.

According to Mai He, president of Tuodiao CNC, a machine tool manufacturer, Chinese-made equipment works just as well, if not better, than European ones. There are also advantages in the price. A piece of equipment made by Tuodiao is more efficient than a similar German product and costs only 750,000 yuan, compared to 2 million yuan for a German one.

We should expect an increase in the share of the yuan in the currency basket of the Russian Central Bank due to the intensification of financial and economic ties between the two countries, as well as the suitability of the yuan as a means of international trade. Accordingly, we should expect a decline in the role of the dollar in Russia’s foreign trade settlements, and the same applies to the euro, although to a lesser extent, given the EU’s continued dependence on Russian gas.

To maximise the use of European dependence, it is advisable to consider the option of concluding new contracts for the supply of oil and gas to Russia exclusively in rubles. This will allow controlling the ruble’s exchange rate against the dollar and euro, and will force European counterparties to bear additional costs under the sanctions they have imposed.

Key points

Several states and regions are becoming particularly important in the “world after Z” for Russia. In addition to China, which is inevitably becoming a key international partner of Russia, Turkey is becoming very important. The ban on direct flights to the EU will require the use of a transit state, which is likely to be Turkey.

South Korea is strengthening its position, as its government managed to get its technology companies exempt from participating in US export sanctions against Russia. South Korean Trade Minister Yeo Han-koo held consultations in the United States, assuring Washington that Seoul will impose its own sanctions against Russia — among them restrictions on the sale of “strategic goods”.

“The US side has confirmed that within a few days it will include South Korea in the list of countries excluded from the FDPR rule. The South Korean government will simultaneously take additional export control measures at a level consistent with the United States and the international community,” the Korean ministry said in a statement.

As a result of the negotiations, the parties came to an agreement that South Korean companies – Samsung, LG and others – will not have to obtain US licenses to supply devices to Russia that were created using American software or technologies.

Earlier, the suspension of deliveries to Russia and Belarus was announced by American AMD and Intel, as well as the largest manufacturer of microprocessors Taiwan Semiconductor Manufacturing Company.

Thus, Samsung and LG maintain and develop their share of the Russian market for microelectronics and home appliances, although China’s Huawei or Meizu will strategically be in a more privileged position. In general, monopolisation awaits the Russian market.

Ensuring safe transit of Chinese goods to Europe through the territory of modern Ukraine is of great importance. So far, this transit continues, but insurance premiums have increased significantly. The supply of Chinese goods requires a safe and guaranteed route, which may lead to increased attention to the Northern Sea Route, as the most efficient route for supplies from China to Europe.

Ukraine remains an important region from the point of view of global strategy, the actual control over which allows to influence many processes. First of all, we are talking about the Black Sea coast, through which the shipment of agricultural products produced in Ukraine is carried out.

The Washington Post article on this issue expresses concern that Russia de facto gets a controlling stake in the world’s wheat and corn supplies, becoming a monopoly administrator in vast regions of the planet.

In 2022, Ukraine planned to take third place among world wheat exporters and fourth among corn exporters. According to the forecast of analysts of the US Department of Agriculture, Ukraine this year would account for 12% of world wheat exports, 16% of corn, 18% of barley and 19% of rapeseed.

Most of the Ukrainian wheat is grown in the eastern regions of the country — Kharkov, Dnepropetrovsk, Zaporizhia and Kherson regions, which will also inevitably be in the zone of Russian influence after the completion of Operation Z.

Most Ukrainian grains are destined for the Middle East and Africa, which are highly dependent on imports. Recently, more than 40% of annual corn and wheat shipments from Ukraine have been sent to the Middle East or Africa, the column says. Among the regions closely linked to the situation in Ukraine are Afghanistan, Egypt, Iran, Sudan and the Maghreb countries.

In 2020, half of all wheat consumed in Lebanon, a country that economically depends on bread as its main product, came from Ukraine. Yemen and Libya import 22% and 43% of grain from Ukrainian territory, respectively.

In addition, in 2020, the Ukrainian state provided more than 20% of wheat in Malaysia, Indonesia and Bangladesh. According to the WP, of the 14 countries that consume more than 10% of wheat from Ukrainian imports, a significant number are already facing food insecurity.

China is also a major importer of Ukrainian agricultural products, so Russia’s control over the Black Sea region, which is key for global food trade, looks like an important element in the balance of bilateral partnership relations.

Brazil, whose President Jair Bolsonaro visited Moscow at the height of the Ukraine crisis in order to provide himself with fertilisers that were scarce due to gas prices, is proving to be a projection point for Russian interests in South America. Saudi Arabia gets the status of a natural partner of Russia, interested in maintaining sufficiently high oil prices. In recent years, Saudi Arabia has increasingly moved away from excessively close relations with the United States, intensifying contacts with other countries, including Russia.

France is becoming a less publicised but important partner. President Emmanuel Macron recommended that representatives of large French businesses operating in Russia should not leave the country “hastily”, Le Figaro reports. Among those who received such a recommendation are the leading French bank Societe Generale, the energy company Engie, the aircraft manufacturer Airbus, the space launch operator Arianespace, the trading house Auchan, and the food company Danone.

The Airbus factor is particularly important in aviation terms.

Aerial iron curtain

More attention should be paid to the situation that arose in the field of civil aviation after March 2, Boeing and Airbus completely stopped servicing Russian aircraft, as well as the supply of spare parts. Earlier, on the night of February 26, a ban was imposed on the supply and leasing of aircraft to Russia, until March 26, all leased aircraft must be returned. In addition, the insurance procedure for Russian aircraft is terminated.

Officially “closed” to Russian aircraft, the European sky is in any case inaccessible to Russian aircraft after the lease is canceled – any plane that lands at a foreign airport will be arrested. This means that the airline fleet is being reoriented exclusively to domestic flights. The issue of insurance looks more simple, air transportation can be reinsured by Russian insurers, as well as by Chinese ones.

Taking into account the number of foreign-made aircraft operating on domestic Russian airlines, Russia will have to solve a difficult task in the coming weeks. According to open data, Russian carriers currently use about 980 passenger airliners, of which 750 are Boeing and Airbus, as well as Embraer and Bombardier, which also joined the sanctions. At least 500 aircraft are subject to return, and the rest will remain without maintenance. The main problem is the software, which requires the competence of the manufacturer. There are approximately 130 Russian Superjet 100s in service.

Based on the reality, Russia can use foreign-made aircraft exclusively on its own territory. The warehouses of airlines operating Boeing and Airbus have a certain stock of spare parts, but as the fleet wears out, the aircraft will be sent to the parking lot.

There are a number of options that will allow to delay the obsolescence and lack of maintenance of aircraft by the manufacturer. Aircraft can be sent for service to a third country, as well as “virtually” transferred to a company from a third country, and then “return” back.

Another potential risk is the revocation of aircraft airworthiness certificates, which in most cases with foreign-made aircraft are issued by the authorities of Ireland and Bermuda. The Russian aviation authorities have already ordered airlines, regardless of the position of the lessor, to transfer their aircraft fleet to the Russian register. Thus, the Russian aviation authorities assume responsibility for evaluating the airworthiness of aircraft.

Completely eliminating all risks will allow a multiple increase in the domestic fleet – Superjet 100 and the rising “on the wing” MS-21. It will take at least a year or two to fine-tune the latter, so we should expect priority work on the already proven Superjet 100 model, as well as the reincarnation of the Tu-204 or Il-96.

Civil aviation is an area where Russia will have to work exclusively on its own resources. China’s civil aviation programs are much more dependent on imported components than Russia’s.

The share of French components in Superjet 100 engines is high, so relations with Paris take on additional importance for the period that is necessary to build our own full production cycle of civil aviation aircraft.

Inverted chessboard

The global consequence of Operation Z, whose lack of alternatives is becoming increasingly obvious with the disclosure of data on Ukraine’s anti-Russian nuclear program, will be Russia’s actual departure from the international system of control and monitoring, including information.

Roskomnadzor has already restricted the operation of the largest Western social networks – Facebook and Twitter, which consistently served as a transmitter of anti-Russian information content and strictly censored information that meets the interests of Russia. Many Western propaganda resources that have been conducting information policies unfriendly to Russia on our territory for years have withdrawn or been legally shut down.

Russia’s work in the OSCE and PACE has been curtailed, its presence in them has become frankly superfluous, and interaction with the IOC and other structures that have become a transmitter of the political will of the West has been reduced to an absolute minimum. At the same time, direct and frank dialogue on the principle of multipolarity became possible, which proved its effectiveness in the example of Hungary, Serbia, Turkey and other states.

Only those gold and foreign exchange reserves that were stored on the territory of Russia itself remained intact. In fact, Russia has moved beyond the borders of the international banking system, and now the only way is to develop its own instruments and partner not with the “collective West” based on “Western values”, but with specific states and leaders based on pragmatism.

Many plans that were destructive to Russia were disrupted. This is the “creeping” drawing of Ukraine into NATO, the construction of a fully-fledged London-Warsaw-Kiev axis, an attempt to influence Russian politics by using Nord Stream 2 as a blackmail tool.

There is a trend towards the nationalisation of Russian elites, including creative ones, as well as the consolidation of society as a whole, which is sure to continue.

Western sanctions and confiscation of the property of Russian citizens have clearly shown the need to store capital at home, and most likely this will be realised by citizens.

Paradoxically, Operation Z has helped reduce the likelihood of conflict in the EU or around the world. The United States, Britain and the EU are trying to refrain from traditional aggressive rhetoric against Russia, Washington is canceling missile tests that could be perceived as a provocation, and even routine NATO reconnaissance flights near Russia’s western borders, primarily in the Crimea region, have stopped.

The inevitable consequence of the Western reaction to Operation Z will be Russia’s final break with the Western bureaucracy and its derived institutions – although bilateral constructive relations with states of interest to Russia will remain.

One of the important consequences will be a sharp increase in the role of China in global finance and technological processes. The EU’s subjectivity, which previously left much to be desired, has been reduced to unacceptably low values, calling into question the existence of the association itself in the medium term. In conditions of “energy poverty” and a multiple increase in household and industrial spending on energy resources, Europe is facing a serious economic crisis and a decline in living standards. We should expect further capital flight from the EU to the US, which will thus be able to delay their own crisis.

With the exception of exchange rate fluctuations, the Russian economy is structurally more prepared for difficult times than in 2014. The sanctions imposed on Russia led to the fact that the European securities of the Austrian Raiffeisen Bank International AG, which receives almost a third of its profits from operations in Russia, fell by 14%. Shares of Italian banks UniCredit and Intesa Sanpaolo fell by 12.35% and 7.97%, respectively, Deutsche Bank securities fell by 7.5%, Societe Generale S. A. quotes fell by 10.3%.

The stock prices of European car manufacturers and auto parts manufacturers also fell sharply. Capitalisation of Stellantis NV decreased by 5.9%, Volkswagen AG – also by 5.9%, Continental AG – by 6.25%. The value of the French Renault, which owns the Russian AvtoVAZ (MOEX: AVAZ), decreased by 6.3%. The price of securities of the Finnish tire manufacturer Nokian Renkaat fell by 20.1%.

European air carriers suffered a serious blow after Russia “closed the sky” for aircraft from the EU. Finnair Oyj shares fell 21% after the Finnish airline withdrew its guidance for the current quarter. The air carrier expects significant negative consequences due to the closure of airspace over Russia, especially if the current situation in the region continues for a long time – which is most likely true.

Russia has enough tools to deal sensitive blows to those who threaten it with sanctions. For example, Russia controls more than 80% of the market for sapphire substrates, which serve as the basis for processor-forming silicon wafers – including AMD and Intel processors.

It is very difficult to create a replacement, and the required quality of sapphire substrates is ensured by zero seismic activity, which is not available in Taiwan or Silicon Valley. In addition, ultra-clean production can only be achieved through years of consistent technical processes. Russia depends on the technology of manufacturing microchips using ultra-pure components, of which it is the sole supplier.

On March 4, the Ministry of Industry and Trade of the Russian Federation recommended that producers suspend fertiliser exports until normal transportation is resumed and delivery guarantees are guaranteed. The ministry stressed that due to the sabotage of deliveries by some foreign logistics companies that refused to work with Russia, farmers both in Europe and in other countries cannot receive the necessary volumes of fertiliser.

Because of this, there may be risks of crop failure and food shortages for European countries, as well as Latin America, South and Southeast Asia. Recall that it was this question that made the Brazilian president go to Moscow.

A comparison of the military budgets of Russia and any other world power shows that the proper control and organisation of processes can achieve high military-technical results for affordable money. Most likely, in the new conditions, the fight against corruption will become much tougher, since national security and sovereignty will literally depend on the effectiveness of budget spending.

The key challenge for Russia remains the need for an early and most extensive transition to import substitution where it does not exist yet. One of the main results of the sanctions imposed in 2014 was the rapid development of Russian agriculture, whose export products quickly became the country’s economic mainstay, and the food security strategy was generally implemented.

For a comparable breakthrough in industrial re-equipment, it is necessary to use mechanisms that have been developed in agriculture and have proven their effectiveness. We are talking about preferential” long-term ” lending, the formation of tax incentives for the most important scientific and technical industries, including IT, automotive and aviation industries.

The role of innovation, including in finance, is growing dramatically. The crisis of traditional financial instruments creates great opportunities for cryptocurrencies protected from sanctions, including the “digital ruble”.

The Russian economy remains a market economy, but the actual mobilisation of the economic reality requires increased attention from the Federal Antimonopoly Service and other supervisory services to actions aimed at trying to obtain abnormal excess profits and withdraw money abroad.

Russia will have at least a decade to live under the conditions of a prudent economic approach, building from scratch a system of new relations with states that can be partners, as well as forming an economy based on its own strength. The experience of fighting the “post-Crimean” sanctions shows that such a task can be accomplished, it is only necessary to take into account and scale up the previous experience.

Source: https://russtrat.ru/en/reports_/22-march-2022-0018-9516