Russian Sanctions Too Little, Too Late

Company Strategy, Economics, Europe

By John Richardson

“A common orthodoxy in Western thought – the notion of  a globalising world in which greater prosperity was ultimately analogous to stability – has  been again thrown into contention,” wrote the Financial Times, in an article worth very close reading, headlined Russia’s New Art of War.

The problem with this common orthodoxy is that this concept of working together to achieve “greater prosperity’ has not necessarily been accepted by countries such as Russia.

And now as Russia confronts being both poor and old (see the chart below), it sees a return to the past as the solution.

PoorandageingIts leaders know that sabre rattling in Ukraine is great for their popularity. Vladimir Putin’s domestic popularity rating is 84%. This helps to distract attention away from economic problems at home.

Where will this stop?

The West assumes that economic sanctions might make Russia pause, or even reverse, in its tracks.

But the more that Russia’s economy suffers, the more it might be tempted to further broaden the scope of its “New Art of War” as discussed by the FT. The advantage of this approach, from its viewpoint, is that increased geographical influence will provide more resources to compensate for the economic impact of sanctions.

It could therefore be wishful thinking to assume that Russia’s pursuit of this strategy might not include a decision to cut gas supplies to Europe at some point this winter. Russia’s end-game means that it might well be prepared to accept short-term economic pain from lower gas revenues.

This highlights the failure of Western leaders to recognise that Russia’s weak demographic position has led to it adopting quite different political and economic strategies.

They assumed that prosperity would inevitably be great enough and widespread enough to keep Russia happy, and they so cut back on NATO spending. As you can see from the chart below, from the same FT article, only six member countries are meeting their NATO commitments to military expenditure as a proportion of their GDP.

Natospending

And so now, very worryingly, the West can only resort to economic sanctions in an attempt to contain Russia. And, as we said, sanctions might well have the opposite of the desired effect.

The lesson in all of this? Demographics shape global economics and politics.

PREVIOUS POST

China Will Not Shut Down. It Will Instead Run Harder.

31/08/2014

By John Richardson EVERY $10 decline in the iron ore price knocks more than $2bn...

Learn more
NEXT POST

China Deals With Demographics In The Right Way

02/09/2014

CHINA’S approach to its challenging demographics are in complete contrast to t...

Learn more
More posts
Global PVC demand could fall by 1.1m tonnes as coronavirus crisis becomes global
26/02/2020

By John Richardson YOU CANNOT stimulate economic activity when factories and offices need to be shut...

Read
China polyethylene imports could be 3m tonnes lower as economy seizes up
24/02/2020

By John Richardson IT IS TIME for crisis planning, I am afraid, as a result of the World Health Orga...

Read
Rescue of major conglomerate, struggling SMEs raise risks for China and global economies
20/02/2020

The most important issue here remains the human cost of the coronavirus outbreak. My thoughts and ho...

Read
Global polyethylene demand in 2020 at risk of 2.4m decline because of coronavirus
19/02/2020

By John Richardson I AM a bit confused this morning following some excitement about the Chinese deci...

Read
Coronavirus: Global polypropylene demand in 2020 could fall by 2.6m tonnes over last year
17/02/2020

By John Richardson SOME GOOD news might be that official Chinese state media announced that the numb...

Read
Coronavirus threatens 2.9m tonnes of China PP demand as uncertainties increase
14/02/2020

By John Richardson THE RUMOURS travelled around my contacts, and I am sure many of your contacts, fo...

Read
More than 3m tonnes of Chinese polyethylene demand at risk from coronavirus
08/02/2020

    By John Richardson THE GOOD news is that medical experts believe the novel coronavirus...

Read
Coronavirus: Global polyester chain faces major production cuts, shortages and cost increases
07/02/2020

By John Richardson A GREAT example of the extent to which global supply chains are exposed to China ...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more