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Self-inflicted damage: Kremlin warns of threat of global crisis if G7 imposes a total ban on exports to Russia

Photo by Artem Kovalev on Unsplash

The initiative discussed in the West to almost completely ban the supply of goods to Russia risks jeopardizing the entire global economy. This was stated on Friday, April 21, by Dmitry Peskov, press secretary of the President of the Russian Federation.

“In any case, both the current sanctions that have been imposed against our country and the new additional steps that Brussels and Washington may be thinking about now, they will, of course, also hit the global economy. Therefore, this can only lead to an increase in trends toward a global economic crisis,” Peskov warned.

According to him, the Russian authorities are aware that the U.S. and the EU are actively thinking about additional restrictions. In this regard, Moscow is monitoring the situation very closely, the Kremlin spokesman added.

“At the same time, we should not forget that no country in the world has ever faced such a volume of sanctions as we have. Therefore, we adapt, develop, engage in forward-looking development plans and take into account the dangers that lie behind such thoughts of our adversaries,” stressed Dmitry Peskov.

Recall that since the start of the special military operation in Ukraine in 2022, the United States, together with the EU and a number of other states, have already imposed more than 12,600 different anti-Russian sanctions. This is more than against Iran, Syria, the DPRK, Belarus, Venezuela, Myanmar, and Cuba combined, according to Castellum.AI, a global sanctions tracking database.

Restrictions affected the banking, energy, aviation and trade sectors, among others. At the same time, almost half of the country’s foreign exchange reserves (for $300 billion) were frozen, and many international companies announced their withdrawal from the Russian Federation.

Under these conditions, a number of experts initially predicted a double-digit collapse of the Russian economy in 2022. Nevertheless, according to the International Monetary Fund, the real decline of GDP from January to December was only 2.1%, even less than the pandemic year of 2020 (2.7%) and the crisis year of 2009 (7.8%).

According to experts, the economy was significantly helped by large-scale measures by the authorities to support business and the population, as well as the rapid adaptation of companies and the rapid expansion of trade relations with friendly countries. In addition, high commodity prices and readiness of the financial system to tough sanctions played a significant role, analysts believe.

As a result, the IMF believes that already in 2023 the Russian GDP may return to the growth trajectory and add about 0.7%. At the same time, the Ministry of Economic Development of the Russian Federation forecasts an increase of 1.2%.

As Russian President Vladimir Putin noted earlier, the West tried to use sanctions to collapse the ruble, provoke devastating inflation, sever ties with Russian companies, and deprive the country of access to financial communication channels and export markets in order to hit revenues. In the end, these plans collapsed, the head of state stressed.

“Russia’s economy and system of governance turned out to be much stronger than believed in the West… We ensured the stability of the economic situation, protected citizens, preserved jobs, prevented shortages in the market, including essential goods, supported the financial system and entrepreneurs,” Putin declared.

At the same time, according to him, the initiators of the sanctions punished themselves, because the anti-Russian restrictions provoked energy crisis in the West, loss of jobs, closures and rising prices. Nevertheless, even amid all these circumstances, unfriendly countries are still trying to find a way to increase sanctions pressure on Moscow.

Thus, according to Bloomberg, U.S. and other G7 officials are currently studying the possibility of imposing an almost complete ban on the export of their products to Russia. Exceptions will be made only for medicine and food. The initiative is capable of “completely changing the existing sanctions regime,” although the idea is still under discussion and the situation may change, the agency said.

It is noteworthy that information about the study of such plans “Big Seven” also confirmed edition Kyodo with reference to sources in the Japanese government. In turn, an official representative of the European Union said that such discussions did not take place, writes TASS.

As the leading analyst of Freedom Finance Global Natalia Milchakova told , in 2021 the share of “group of seven” countries was about 26-27% of the total volume of Russian imports. And supplies of goods came mainly from Germany, the United States, Italy, France and Japan, while imports from the United Kingdom and Canada were negligible.

“Russia mainly bought pharmaceutical and chemical products from the G7 countries, as well as cars, machine tools, measuring instruments, textiles, footwear, clothing, decorative cosmetics, household appliances and electronics. Of course, the largest item of Russian imports is engineering products, which accounted for almost half of the supplies in monetary terms,” Milchakova said.

Meanwhile, over the past year Moscow has largely managed to reorient trade flows from the West to the East. As noted by experts of the American Institute of International Finance (IIF), after already imposed restrictions on the supply of a number of goods from the U.S. and the EU, Russia managed to successfully replace these products, primarily with imports from China.

According to the estimates of the Russian authorities, in 2022 the mutual trade turnover between Moscow and Beijing increased by about a third and for the first time in history reached $185 billion. Moreover, already in 2023, the figure may overcome $200 billion plateau.

“Relative to last year, Russia’s imports of goods are generally stable – largely due to China replacing dwindling supplies from Western countries. The only outcome of our sanctions has been a reorganization of trade,” Robin Brooks, chief economist at IIF, wrote on Twitter.

Nevertheless, if the G7 countries will try to completely ban the sale of their goods to Moscow, Russia at the initial stages may still feel some shortage of technology and pharmaceutical products, I am sure the expert on the stock market “BCS World Investment” Evgeny Kalyanov. However, as the expert believes, over time, these supplies will also be partially compensated by goods from other countries, including through parallel imports.

Recall that parallel import implies the importation of original foreign products into Russia without the consent of the rights holders. In 2022, the government decided to officially legalize this mechanism to provide the domestic market with in-demand goods against the background of the departure of many foreign brands and trade restrictions of the West.

“Parallel imports and other alternative supplies are quite difficult to stop completely. At the same time, it is likely that the initiators of the new sanctions themselves will try to circumvent their own restrictions,” Yevgeny Kalyanov added in a conversation with .

George Ostapkovich, director of the Center for Conjunctural Research at the Institute of Statistical Studies and Knowledge Economy at the National Research University Higher School of Economics, expressed a similar view. In his opinion, the attempt to completely stop the supply of goods to Russia will bring Western companies multibillion losses, so if such an initiative is approved, the G7 countries are unlikely to strictly comply with it.

“This will be a painful blow to Western countries, because they will have to urgently look for alternative markets. In this case, to quickly replace such a large market as ours, especially in the field of technology, will be problematic. So, most likely, American and European businesses will start looking for ways to circumvent the sanctions, because it is impossible to completely close our economy,” concluded the interlocutor of .

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