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Thread: A New Phase in the Global Economic War

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    A New Phase in the Global Economic War

    In response to Russia's invasion of Ukraine, the West started an economic war with Russia. That economic war has entered a new phase.

    A New Phase in the Global Economic War

    When Russia invaded Ukraine in February, it didn’t just start a ground war in Europe – it opened up what would become a worldwide economic war involving nearly every major power. The West responded to the invasion by imposing sanctions and using the international financial system against Russia, hoping to bleed Moscow enough economically to come to terms. Instead, Russia dug its heels in, doubling down on the decades-long strategy of weaponizing its energy sales to Europe while searching for new allies and buyers. Naturally, the removal of Russian energy sent shocks throughout the global economy.


    Nearly six months later, the world has entered a new phase of the economic war. Even major powers are dealing with surging inflation, an ongoing pandemic, energy shortages and a potential food crisis. Extended high temperatures across Europe have raised energy demand for consumers trying to stay cool, as industry attempts to ramp up production as part of a long economic recovery. And that’s to say nothing of the upcoming winter, droughts in both hemispheres, pollution, supply chain disruptions, and continued ravages to fertile lands in Ukraine – all of which will compound global economic problems.


    While inflation means higher prices for everyone, the consequences of the economic war go beyond price concerns. The shipping industry, for example, has been disproportionately affected. After the initial Russian invasion, the industry’s primary concern was to resolve war zone-related issues – for example, getting ships out of the northern shore of the Black Sea – before dealing with higher operational costs. The Russian shipping industry in particular is at all but a standstill. Though it accounts for just 1 percent of global shipping, Russians themselves account for nearly 11 percent of the seafaring workforce; Ukrainians account for nearly 5 percent, and so the war has created a labor shortage in the industry. Meanwhile, operators have developed audit procedures to make sure both shipment ownership and merchandise doesn’t come under sanctions – all of which is not only costly but time consuming, slowing down global supply chains while they are still under the impact of pandemic policies.


    The insurance industry was next to adapt to the new business environment. The first challenge for insurers was to develop procedures that made it possible to audit institutional exposure to sanctions as they came (at an unprecedented pace, no less). Ensuring effective compliance in a rapidly evolving landscape is not only expensive but also risky, considering the potential for business losses. The pace of change that the implementation of the sanctions imposed has rendered companies unable to insure a sanctioned person or reinsure a sanctioned insurer, regardless of the type of business. Keeping tabs on sanctions, now business as usual, continues to increase operational costs and inflate the premiums paid by businesses worldwide, all of which are included in the final consumer price.


    For all these reasons, rivalries will continue to grow as nations determine what is best for themselves. They will have to adapt their policies to the massive accumulation of minor and major shocks that result from the high uncertainty both producers and consumers are facing. These will include restricted exports, higher storage thresholds, measures supporting increased domestic production or even rationing. This will ultimately result in unintended, unpredictable consequences that will be harder to manage for all states, with some taking the hit more than others.


    Case Study: France and Germany

    ***


    War is the ultimate disruptor. The risk of global economic destabilization grows with each step, offensive or defensive, in the economic war, and as business executives’ decisions trickle through the supply chain. Together, this accelerates the fragmentation process that was already underway because of the pandemic.


    Europe and Russia will be most affected first. A difficult winter is coming for both. Europe’s energy dependence on Russia is a massive challenge, especially during the Continent’s worst drought in decades. For Russia, even if it can find new markets to sell to, the stream of key technologies into the country is drying up. Things will get worse late in the year, especially if we factor in the uncertain labor market. Moscow’s insistence that things are going well is worrying. For both Russia and the global economy, they clearly aren’t.
    ΜOΛΩΝ ΛΑΒΕ


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    donttread (08-10-2022)

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    Quote Originally Posted by Peter1469 View Post
    In response to Russia's invasion of Ukraine, the West started an economic war with Russia. That economic war has entered a new phase.

    A New Phase in the Global Economic War


    When Russia invaded Ukraine in February, it didn’t just start a ground war in Europe – it opened up what would become a worldwide economic war involving nearly every major power. The West responded to the invasion by imposing sanctions and using the international financial system against Russia, hoping to bleed Moscow enough economically to come to terms. Instead, Russia dug its heels in, doubling down on the decades-long strategy of weaponizing its energy sales to Europe while searching for new allies and buyers. Naturally, the removal of Russian energy sent shocks throughout the global economy.


    Nearly six months later, the world has entered a new phase of the economic war. Even major powers are dealing with surging inflation, an ongoing pandemic, energy shortages and a potential food crisis. Extended high temperatures across Europe have raised energy demand for consumers trying to stay cool, as industry attempts to ramp up production as part of a long economic recovery. And that’s to say nothing of the upcoming winter, droughts in both hemispheres, pollution, supply chain disruptions, and continued ravages to fertile lands in Ukraine – all of which will compound global economic problems.


    While inflation means higher prices for everyone, the consequences of the economic war go beyond price concerns. The shipping industry, for example, has been disproportionately affected. After the initial Russian invasion, the industry’s primary concern was to resolve war zone-related issues – for example, getting ships out of the northern shore of the Black Sea – before dealing with higher operational costs. The Russian shipping industry in particular is at all but a standstill. Though it accounts for just 1 percent of global shipping, Russians themselves account for nearly 11 percent of the seafaring workforce; Ukrainians account for nearly 5 percent, and so the war has created a labor shortage in the industry. Meanwhile, operators have developed audit procedures to make sure both shipment ownership and merchandise doesn’t come under sanctions – all of which is not only costly but time consuming, slowing down global supply chains while they are still under the impact of pandemic policies.


    The insurance industry was next to adapt to the new business environment. The first challenge for insurers was to develop procedures that made it possible to audit institutional exposure to sanctions as they came (at an unprecedented pace, no less). Ensuring effective compliance in a rapidly evolving landscape is not only expensive but also risky, considering the potential for business losses. The pace of change that the implementation of the sanctions imposed has rendered companies unable to insure a sanctioned person or reinsure a sanctioned insurer, regardless of the type of business. Keeping tabs on sanctions, now business as usual, continues to increase operational costs and inflate the premiums paid by businesses worldwide, all of which are included in the final consumer price.


    For all these reasons, rivalries will continue to grow as nations determine what is best for themselves. They will have to adapt their policies to the massive accumulation of minor and major shocks that result from the high uncertainty both producers and consumers are facing. These will include restricted exports, higher storage thresholds, measures supporting increased domestic production or even rationing. This will ultimately result in unintended, unpredictable consequences that will be harder to manage for all states, with some taking the hit more than others.


    Case Study: France and Germany

    ***


    War is the ultimate disruptor. The risk of global economic destabilization grows with each step, offensive or defensive, in the economic war, and as business executives’ decisions trickle through the supply chain. Together, this accelerates the fragmentation process that was already underway because of the pandemic.


    Europe and Russia will be most affected first. A difficult winter is coming for both. Europe’s energy dependence on Russia is a massive challenge, especially during the Continent’s worst drought in decades. For Russia, even if it can find new markets to sell to, the stream of key technologies into the country is drying up. Things will get worse late in the year, especially if we factor in the uncertain labor market. Moscow’s insistence that things are going well is worrying. For both Russia and the global economy, they clearly aren’t.
    They have figured out how to destroy free markets in so many ways. Sanctions, government pressure on small nations, monopolies, ologopies, regulations, influence for sale, tax manipulation, biased university, apps that trade stocks and so much more.
    The hands of the world's greedy leaders and influence sellers, megacorps ( not all but some) are firmly around the neck of the Golden Goose.
    What now? Where would we go from here if they actually kill the goose? Something new? Or dark ages?

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    Quote Originally Posted by donttread View Post
    They have figured out how to destroy free markets in so many ways. Sanctions, government pressure on small nations, monopolies, ologopies, regulations, influence for sale, tax manipulation, biased university, apps that trade stocks and so much more.
    The hands of the world's greedy leaders and influence sellers, megacorps ( not all but some) are firmly around the neck of the Golden Goose.
    What now? Where would we go from here if they actually kill the goose? Something new? Or dark ages?
    Yes it looks like something new: nations conducting free trade only with their allies or neutrals. Bye to global free markets.
    ΜOΛΩΝ ΛΑΒΕ


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