First, global supply chains are broken and economic decoupling may intensify. The United States and its Western allies have imposed unprecedented sanctions on Russia. The United States and other Western countries have frozen the assets of the Russian central bank, banned the export of high-tech products such as important raw materials, steel, aircraft parts and communication equipment to Russia, kicked Russian banks out of the SWIFT international settlement system, closed airspace to Russian aircraft, and prohibited domestic companies from Russian investment. Western multinational companies have also withdrawn from the Russian market.
The Western economic sanctions against Russia will only make things worse for the global industrial chain. The single global market, from high technology, vital raw materials, energy to transportation, will become more fragmented. The U.S. freezing of the Russian central bank’s dollar reserves will force countries around the world to think about the reliability of the U.S. dollar and the SWIFT payment system. The trend of de-dollarization of the international financial system is expected to strengthen.
Second, the global economic center of gravity is shifting eastward. Russia has rich oil and gas resources, vast territory and well-educated citizens. The attempts of the United States and the West to sanction the Russian economy can only help the Russian economy to move eastward in an all-round way. Then Asia’s position as the most active and potential region in the global economy will be further consolidated, and the eastward shift of the global economic center of gravity will become more obvious. Western sanctions may push the BRICS and SCO to increase economic and trade cooperation. Closer economic and trade cooperation between these countries is also worth looking forward to.
Again, the multilateral trading system continues to be under attack. The West has cancelled Russia's most-favored-nation trade status on the grounds of "national security exceptions". This is another fatal blow to the multilateral trading system following the shutdown of the WTO's Appellate Body caused by the United States.
According to WTO regulations, members enjoy most-favored-nation treatment. The cancellation of the most-favored-nation treatment by the West to Russia violates the non-discrimination principle of the WTO, causing an unprecedented impact on the basic rules of the multilateral trading system, thus endangering the very foundation of the WTO's survival. The move revealed a move away from multilateral tradeism. The sanctions by the United States and other Western countries also signal that global trade rules will give way more to geopolitics as bloc politics prevail in multilateral institutions. The WTO will bear the impact of a greater wave of anti-globalization.
Finally, the risk of stagflation in the global economy has increased. Global food and energy prices have soared following the outbreak of the Russia-Ukraine conflict. According to JPMorgan Chase, the world economic growth this year will be reduced by one percentage point. The International Monetary Fund will also cut its forecast for global economic growth in 2022.
Post time: Aug-22-2022