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Sanctions come back to bite the west

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Written by   64
2 months ago
Topics: Money, News, Economics, Finance, Politics, ...

5th Sept 2022

Just as the UK and Europe seemed to be emerging from one crisis the Covid-19 pandemic. Along comes another that threatens to affect the health of people much more than Covid-19 ever did.

In the UK and Europe colossal sums of money were thrown at suppresing the spread of the virus and supporting businesses to stay afloat with loans and help with the furlough scheme for which, here in the UK people were paid 80% of their salary to 'stay at home, protect the nhs, save lives' that was the govenments catchphrase.

The UK govenment borrowed record sums, a total of £303bn in the first full financial year of the crisis alone. This amount is double the previous record of £158bn which was set during the financial crisis of 2007/2008.

Output slumped, tax receipts decreased and the government engaged in a policy of 'quantitive easing' which is basically printing money, which of course has the effect of making it less valuable and fueling inflation, we should have seen this coming, the ecconomic hardship caused by this policy could cost more lives than the Covid-19 pandemic itself.

Only last year the govenment were saying that high inflation was only going to be temporary before returning to normal. I think high inflation is going to be around for some time yet!

At the very time that the west was at its weakest ecconomically, Vladimir Putin decided to invade Ukraine. For years Putin has been warning the west of the concequnces of expanding Nato right up to the Russian border and calculated that this would be the best opportunity he would have to make a pre-emptive strike against Ukraine before it ever had the chance to join Nato.

Of course the west has responded with hard hitting sanctions against Russia which will be painful for Putins regime, however Putin has a way in which he can fight back by weaponizing the supply of gas.

Last year, Russia supplied 40 percent of the gas uses by the EU. Russia has reduced the flow through main Nord Stream 1 pipeline to just 20 percent of its capacity and which has made it difficult for Europe to build up supplies ahead of winter.

The flow of gas from the Nord Stream 1 pipeline has been cut to around 20% of capacity, picture courtesy of Pixabay.

The price of fuel has already increased by more than 80% in recent months and is set to go even higher next year.

When sanctions were first imposed on Russia the value of the ruble fell dramatically. On March 9th of this year $1 USD would have bought as much as RUB 138, but today $1 will only buy around RUB 60, in fact the Ruble now is stronger than it was before the sanctions were imposed, it has seen a rapid recovery in its value.

Meanwhile the UK and Europe are feeling the effects of the sanctions imposed on Russia, due to the way in which Russia has responded. Inflation is rocketing, people are suffering due to the high cost of fuel and this is only set to become worse over the winter.

We are dependant on Russian gas and I wonder how long that people here in the west will stand for all the money being spent on suppling Ukraine with weapons to fight the russians. Talk of re-taking Crimea from Russia is delusional, Putin will not be backing down. How long will Ukraine be able to rely on the help of the west? When people in the UK and Europe don't have enough money to heat their homes or put food on the table, how will they feel about spending billions on supplying Ukraine with weapons.

Its an awful situation, of course I feel for those in Ukraine who have had to flee their homes or lost loved ones in the conflict.

War is an awful thing, who knows where this will end up. The nuclear threat is ever present too, lets hope that it never comes to a nuclear war but if Putin feels that his regime is under threat who knows!

All we can do is hope and pray for peace, and maybe talking is better than fighting!

Maybe it is time to be pragmatic, I wonder if you have any views about this, let me know in the comments below.

Article is my own.

Pictures courtesy of Pixabay

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Written by   64
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