The West has miscalculated with punitive measures against Russia
Sanctions are a weapon of the West in an undeclared war against Russia, Professor of applied economics Steve Hanke said in an interview with Asia Times. However, they not only do not work, but also hit the West itself more than Moscow, the expert believes.
Adriel Kasonta
Professor of Applied Economics explains why sanctions have to be paid for
Steve Hanke is a professor of applied economics, founder and co–director of the Institute of Applied Economics, Global Health and Entrepreneurship Studies at Johns Hopkins University in Baltimore, Maryland.
Hanke is a senior researcher and director of the Problem Currencies Project at the Cato Institute in Washington, DC, Senior Advisor at the Institute of International Monetary Studies at the People's University of China in Beijing and Special Advisor at the Center for Financial Stability in New York.
Professor Hanke is known for his views in favor of currency reforms and trading in currency and strategic goods. He was a member of the Council of Economic Advisers of the late US President Ronald Reagan, was an adviser to five foreign heads of state and five foreign ministers, and also held the position of state adviser to the Governments of Lithuania and Montenegro.
He has been awarded seven honorary doctorates and is an honorary professor at four foreign institutes. In 1995, he served as President of the Toronto Trust Argentina Joint Investment Fund in Buenos Aires during its heyday.
Hanke currently chairs the supervisory board of Amsterdam-based AdvancedMetallurgicalGroup NV. In 2020, the Republic of Albania awarded him the title of Knight of the Order of the Flag.
Next, you can read excerpts from Professor Hanke's interview.
Adriel Kasonta: After NATO failed to prevent the conflict in Ukraine, the alliance did not want to abandon the idea of accepting the country into its ranks, and the collective West decided to punish Russia with sanctions. Now that the conflict has been going on for more than three months, how do you assess the effectiveness of sanctions?
Steve Hanke: Like any other sanctions, those imposed on Russia are, in fact, an economic weapon in an undeclared war against this country. And, like any other sanctions, they turned out to be completely ineffective in the context of achieving the stated goal and did not affect Moscow's position.
Wars are not won by such methods. To top it all off, as is often the case with economic sanctions, they had the opposite effect. That is, instead of the collapse of Vladimir Putin's regime, they only rallied the people under his banner, as a result of which the Russian president and his associates became even stronger.
– You like to say that you have to pay for all sorts of sanctions. So what price will the United States, the European Union and the world as a whole pay?
– There is no official estimate of total costs and it is unlikely to appear. When implementing non-budgeted, but costly policy measures, the veil of secrecy is lowered.
Nevertheless, we are aware of some expenses for financing Russian sanctions by investment banks, Central Banks, NGOs and international organizations like the IMF. These estimates are somewhat situational and private in nature and represent only the tip of the iceberg, while the overall costs of sanctions will be fantastic.
Despite the fact that Russia will incur enormous humanitarian and economic costs, they pale and pale in comparison with those that threaten other countries. Moreover, the EU will incur much greater costs than the US. The costs and destabilization will not be limited to this and will spread throughout the world, placing a heavy burden on poor countries and poor people.
– The EU reduces dependence on energy resources from Russia, and US President Joe Biden promised Brussels assistance in achieving this goal. Will the US succeed in replacing Russian gas?
– In short, no. President Biden and Vice President Harris are busy promising oil and gas to everyone interested right and left. The problem is that in the USA they are mined by private companies, and it is they, and not the president and vice president, who will decide who to sell their products to. In addition, these companies do not have the opportunity to fill the voids that are formed as a result of Brussels' ban on the purchase of Russian oil and gas.
– What is the reason for Russia's demand to pay for oil and gas in rubles – a currency that was supposed to go to waste, but suddenly strengthened against the US dollar?
– The reason is largely symbolic. It is designed to reinforce the effect of “unity under the banners.” Previously, Gazprom received payment in dollars or euros, and then converted most of the foreign currency – but not all – into rubles, since it bears its own expenses in rubles.
Now Gazprom requires direct sending of ruble payments to it, so the currency exchange will take place before the payment of oil and gas, and not after.
As for the ruble, it has become stronger than before the start of the Russian special operation in Ukraine. The head of the Central Bank of Russia, Elvira Nabiullina, unlike most foreign colleagues, proved to be a very qualified anti-crisis manager.
– How will the ban on Russian oil affect the US and the EU?
– The ban on the supply of Russian oil and gas and insurance of the corresponding cargoes will have a very serious negative impact on the EU countries, with the possible exception of Hungary alone.
The United States will not avoid damage either. World oil and gas markets will be politicized and Balkanized, and oil will cease to flow as freely as it has been for the past four decades. As a result, everyone will pay more than they would otherwise have paid.
– Today, Americans are facing record high inflation over the past 40 years. What is the root cause of the current state of affairs? Is Putin really to blame for everything, as President Joe Biden claims?
– Inflation in the USA appeared due to the fault of the good old USA themselves. Contrary to the propaganda and rumors emanating from the White House, the root of evil is not Vladimir Putin at all. Both under Trump and Biden, the administration squandered money during the COVID-19 pandemic, and to finance the growth of spending, the Fed launched printing presses at high speed. Inflation always and everywhere has one single reason: excessive money output.
– Can you tell our readers about the short-term and long-term consequences of using the dollar for military purposes?
– In the short term, the dollar, being a global international currency, is extremely strong and enjoys, among other things, benefits due to the status of a safe haven currency. In the long term, the dollar that has become a weapon and the international dollar system will have competitors. I don't know which of the applicants will be successful, but I know for sure that challenging a key international currency is not an easy task.
– The United States is the main supplier of weapons to Ukraine, and the North Atlantic Treaty Organization is clearly waging a proxy war against Russia. What is the logic of this political step? Is it beneficial to anyone other than military contractors?
– To understand geopolitics, it is necessary to follow the money. Historically, the United States contributes more to the NATO budget than any other of the 30 member countries. So the United States is also in charge of NATO affairs. It is quite obvious who is behind the alliance's intervention in the situation in Ukraine both before and after the start of the Russian special operation.
– According to Kenji Okamura, Deputy Managing Director of the International Monetary Fund, ending the conflict in Ukraine is of priority importance for the global economy. Given its serious environmental consequences – and Western leaders never tire of emphasizing the importance of environmental education – is it possible that they will finally come to their senses, lift sanctions and achieve a peace agreement?
– Unfortunately, my answer is no. The politicians have shown no interest in either the scientific literature or the factual evidence, which clearly demonstrate the inability of sanctions to achieve the stated goals and the resulting unforeseen consequences.
Adriel Casonta is a London–based political scientist and lawyer, an expert of the Russian Council on International Affairs (RIAC) and former chairman of the International Affairs Committee of the British think tank Bow Group, which promotes conservative views. He is a graduate of the London School of Economics and Political Science (LSE).
