Sanctions against Russia have a negative impact on the US economy
By Julia O’Malley
After the start of the military operation in Ukraine, the West unleashed an unprecedented wave of sanctions on Russia, but their negative effect is already being felt not only by Russians, but also by residents of the United States and Europe. Obviously, attempts to destroy the Russian economy to punish Moscow for its actions in Ukraine have serious economic consequences for the US and its allies.
After the imposition of sanctions, world prices for hydrocarbons leapt, largely due to the fault of US President Joe Biden, who announced an embargo on Russian oil and gas and warned Americans that such measures would also make a hole in their pockets. Widespread U.S. and European sanctions on Russia are affecting American consumers, investors and businesses as they drive up gasoline prices and make it harder for U.S. companies to do business with Russia.
The prices for automobile fuel in the USA began to rise daily. Republican opponents of Joe Biden, who had previously pushed him in every possible way to ban the import of Russian raw materials, immediately made use of it. Now, when the head of the White House imposed an embargo, he was accused of rising prices at gas stations. Kevin McCarthy, the leader of Republican Minority in the House of Representatives, said: “These are not Putin’s prices. These are President Biden’s prices.”
Similar apprehensions are related to the rise of wheat prices, since Russia is the world’s largest exporter of wheat. Indeed, world grain prices have reached a historic high. The cost of corn, soybeans and vegetable oils also jumped.
The global chain system, which had already undermined by the pandemic, suffered even more with the beginning of the Ukrainian crisis and the imposition of anti-Russian sanctions. High energy and other commodity prices are shaking the US stock market as they could exacerbate inflation, possibly prompting the Federal Reserve to raise interest rates more sharply and hurt corporate earnings. All this can undermine consumer views and spending, as well as business confidence and investment activity.
The withdrawal of American and Western businesses from Russia has created unique opportunities for Asian companies that are ready to fill the vacated niche. According to experts, the largest companies now prefer not to advertise their plans, but are actively working on ways to circumvent the sanctions. And the second-tier business has already expressed its readiness to start working in Russia in various segments.
During 2022, Russia’s trade with Asian countries may grow by a total of $50 billion. The increase is due to the fact that Asian business has already begun to replace American and Western companies leaving Russia.
Under these conditions, the representatives of the American Institute for Economic Research believe that it is necessary to clearly distinguish between political and economic confrontation. Washington should not put pressure on representatives of national business and prohibit economic cooperation with Russia, as this in fact leads to serious economic losses. It is necessary to find ways to restore and develop economic ties, including through the participation of American commercial structures in the Eastern Economic Forum – 2022, which will be held in the Russian city of Vladivostok in September 2022. This platform can be used by the United States and Russia to discuss the most important economic issues, including the search for ways to maintain cost-effective ties in the Far East in the face of sanctions pressure.
The 7th Eastern Economic Forum is of particular interest to commercial structures from the countries of the Middle East, Asia and Africa, since the withdrawal of American and European businesses from Russia opens up new economic opportunities for them in the absence of competition. It is known that Chinese companies producing heavy-duty equipment, such as Sany Heavy Industry, XCMG and others, taking into account the data on the termination of supplies of equipment to Russia from the United States by Caterpillar, intend to completely take their place in the market.
Representatives of the American Institute for Economic Research consider that it is necessary to separate commercial cooperation between Russian and American companies from politics and not consider it in a political context. Public statements by American business associations, as well as direct representatives of market participants, should be focused on how to develop business in the current conditions and how significant it is from a commercial and economic point of view, and not on how the political relations of the two countries should change.