The perverse effects of sanctions means rising fuel and food costs for the rest of the world – and fears are growing of a humanitarian catastrophe, says Larry Elliott, the Guardian’s economics editor
on Vladimir Putin not because they were considered the best option, but because they were better than the other two available courses of action: doing nothing or getting involved militarily.
There is, though, no immediate sign of Russia pulling out of Ukraine and that’s hardly surprising, because the sanctions have had the perverse effect of driving up the cost of Russia’s oil and gas exports, massively boosting its trade balance and financing its war effort. In the first four months of 2022, Putin could boast a current account surplus of $96bn – more than treble the figure for the same period of 2021.
. The Kremlin has time to find alternative sources of spare parts and components from countries willing to circumvent western sanctions.last week, the public message was condemnation of Russian aggression and renewed commitment to stand solidly behind Ukraine. But privately, there was concern about the economic costs of a prolonged war.
As a result of the war, western economies face a period of slow or negative growth and rising inflation – a return to the stagflation of the 1970s. Central banks – including the Bank of England – feel they have to respond to near double-digit inflation by raising interest rates. Unemployment is set to rise. Other European countries face the same problems, if not more so, since most of them are more dependent on Russian gas than is the UK.