Is Russia dictating war on its own terms, will it trigger global recession?

Russia’s economic apocalypse has not happened. Western firms exited Russia after sanctions were imposed two weeks after it invaded Ukraine. Russia’s military objectives now seem focused on the eastern flank of Ukraine. Russia has been challenged by Ukraine’s tenacity and anti-SAM tenacity. Russia has also been shocked by global anger and failure to comprehend its message that NATO’s eastward expansion is an existential threat to its security. 

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Infact the outcome of the Ukrainian war will be the likely admission of peaceniks, Sweden and Finland to NATO.  The Ukraine war has for obvious reasons totally blacked out humanitarian disasters on a bigger scale, Afghanistan has been left for the dead, Yemen and Syria continue on the same track.
Why has Russia survived the sanctions so far? First, it’s now clear Russia not only encircles Europe, the bulbs and the engines run on Russian energy. Europe imports $900 million worth of energy a day from Russia.

 Sanctions are yet to touch this cash cow which has supported the Russian war effort whose cost is $1 billion a day. The small portion of Russian energy imports affected are coal which is only $20 million worth of exports a day. Russia has been preparing for this moment. Already after decades of revisions, it placed the Russian economy globally first at 19th, then 13th, and now has it in 11th position. This may not mean much to the average reader if one does not factor in the strategic resources Russia has; energy, natural resources including precious minerals, a strong industrial base, higher education and very fertile farmland.  Infact the Russian deficit has been military modernization. The war will create even more urgency for this. In Chernobyl, the nuclear disaster site, the Russians were forced to evacuate after being exposed to radioactive waste. The Russian infantry entered Ukraine with dated T-tanks, and obsolete trucks [Ugandans will identify with the IFA trucks] kids used to crack jokes at these junksters called [Infa, I am dying].

The Russian airpower while significantly overbearing at high altitudes has been an easy prey to anti-aircraft missiles including shoulder fired ones.  Big powers pride themselves with strong naval power. Naval power is used to project both air power and provide cover to advancing armies. This has not been a big factor and Russia’s advance to Odessa stilled by the sinking of a big warship. Russian pride will not allow this to last long, machinists will soon be at work to start a new arms race. Clients in the third world including Uganda will be reassessing the efficacy of the hardware in store. Uganda’s purchase of Sukhoi-27 fighter jets in 2011 torpedoed the currency exchange rate from the Shs 2000 range to the Shs3000 range after forex reserves were depleted from Bank of Uganda where it has been ever since.

As coffee exports approach the miraculous $1 billion mark, a record obtained once in 1990, this appetite for “re-arming” may be on again. The world is watching with concern what happens next. Move over global warming, it’s the economy which has overheated. A growing number of economists forecast the global economy to enter into a recession by the first quarter of next year. In the US, the blame is on the Fed for taking too long to remove its foot from the accelerator [cheap credit] and intervening in social policies promoting stimulus. The real reason is the Russia fueled surge in global energy prices. The 1970s may be here soon. After global economies crashed in the 1970s, the United States undertook to denominate and facilitate payments for global crude oil transactions hence the term “petro-dollar”. 

By doing this the United States has been at the center of each and every “energy conflict”. Russia, OPEC’s second biggest oil producer and China, the largest oil importer are resisting this. There are more players on the sidelines who are watching ill at ease including Saudi Arabia OPEC’s biggest producer and a low cost one at that.

A 2020s recession is more than balance of payments, its’ also chronic shortage of essential supplies, food, medicine, energy. This alone is likely to fuel even more conflict especially in countries with fragile social safety nets. Corvid-19 already sent 1 billion people back into poverty. More is yet to come as Vladimir Putin mulls his next move.

Mr Ssemogerere is an Attorney-At-Law and an Advocate. [email protected]