Most of The World Is Walking Away From U.S. Sanctions On Russia

The U.S. may be the world’s largest economy ($25 trillion), but its share of global GDP measured as a percentage of the total has been shrinking even as large developing economies, including India, Brazil, China, and Indonesia, keep coming up in the ranks. In fact, the world’s four largest developing economies (China, India, Russia, and Iran) have a combined GDP larger than the United States.

When the next three (Brazil, Mexico, and Indonesia) are included as part of this developing economy G7, the gap over the U.S. grows by another $4.6 trillion. The individual developing economies may be smaller than the U.S., but collectively they are far too big to ignore.

And it’s not all about size. Those same developing economies and a few others can influence world prices in key commodities such as oil, natural gas, soybeans, and manufactured goods, including automobiles and communications technology. That’s why the participation of these economies in the financial sanctions against Russia led by the United States is critical.

If these developing economies don’t participate, that leaves far too many trading partners with Russia for sanctions ever to be effective. This article, really a set of detailed graphical illustrations, shows that the world is far more fractured than the U.S. anticipated and that many key nations are not joining the sanctions regime.

The U.S. initially got 141 nations to join a UN resolution demanding Russian withdrawal from Ukraine. Only four nations supported Russia. Still, even that initial resolution drew “abstain” votes from India, China, and some other key developing economies.

More recently, other large economies have moved to a “neutral” position on sanctions. These countries include Brazil, Turkey, and U.A.E. Other countries in the abstain or neutral position include South Africa, Indonesia, and Switzerland.

It’s not the case that these countries support Russia. It’s simply the case that they want to keep out of the fight and don’t want U.S. sanctions to disrupt their trading relationships with Russia.

In fact, India and China are the two biggest buyers of oil that Russia might otherwise have sold to Europe. China is selling automobiles, semiconductors, and machinery to Russia. Turkey has greatly expanded its exports to Russia. Iran is selling weapons to Russia, including “kamikaze” drones that act like slow-motion cruise missiles that can linger over targets and allow go/no go decisions quite late in the attack sequence.

Apart from inherent flaws and limitations in the U.S.-led sanctions process, this lack of cooperation by major developing economies severely weakens the impact of the sanctions in all events. And the more these neutral economies trade with Russia, the less any of them will need U.S. dollars as a medium of exchange.

The U.S. sanctions are not only failing, but they are also contributing to the long-term decline of the dollar as the world’s leading payment currency.

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