This article is reproduced from the authors 丨Brian Huang and Wang Yingliang
Russia has suffered from "exclusion" and "decoupling" of various economic forms, which may be irreversible in the short term, and Russia may become a new "depression" for the global economy.
Globalization is the process of exchanging worldviews, products, concepts and other cultural elements and achieving international integration. The intuitive manifestation of globalization is in the transnational movement of trade, investment and people, that is, the global interconnection of people, money, goods, intelligence and services.
Globalization has been unfolding on a large scale since the 1970s, and so far, countries have basically gained a position in the global industrial chain that matches their own strength, and trade and investment and commentary have once become classic theories, but the problem is that human beings cannot avoid war. In peacetime, the challenges of globalization mainly come from trade and investment barriers between countries, economic nationalism, etc.; during the war, globalization faces new resistance, and the national resentment caused by the war and the artificial market cuts will damage globalization expectations.
Unlike the previous Soviet Union, which was subject to US economic sanctions and trade embargoes, the Soviet Union's economic and trade relations within the Warsaw Pact can still be remarkable. Despite the security rivalry between the United States and the Soviet Union, in fact, the Soviet Union's grain trade with the United States has remained hot. After the outbreak of the Russian-Ukrainian military conflict, the world's major multinational corporations imposed intensive sanctions and exclusions on a sovereign country, resulting in the setback of globalization. Indeed, globalization does not proceed exactly according to commercial logic, but also in accordance with the security needs of the great powers and the interests of coalition groups. When the business logic does not meet the needs of great power competition, transnational corporations may become the vanguard of sanctioning rival countries, quickly make cuts with specific countries with lightning speed, and even achieve the goals that war cannot achieve in a relatively short period of time.
Sanctions against Russia are more like a "continental blockade policy" of the 21st century. Multinational corporations that appear to be devoid of any political symbols carry considerable political symbols themselves. Either because of the policies of the home government, or because of the political likes and dislikes of multinational leaders, or because of actual market competition and fear of risk, European countries and multinational companies under the influence of the United States have implemented corresponding sanctions plans. Russia has been squeezed out by the main controlling forces of globalization, including the US government, not only blocking all elements of Russia's foreign economic circulation on the surface, but also strictly preventing and controlling the Russian government's use of "dark gold" for secret payments.
In an economically dependent environment, Russia is also ready to fight back. On March 1, Putin signed a presidential decree on supplementary interim measures to ensure financial stability, imposing regulatory restrictions on economic activities such as the provision of ruble loans and securities and real estate transactions with people from "unfriendly countries", and requiring that from March 2 onwards, it is forbidden to carry cash equivalent to more than $10,000 equivalent to $10,000 at the official exchange rate of the Central Bank of Russia on that day. Russia's Kommersant reported on March 2 that the Russian government was trying to retain foreign investors through special measures. Affected by the sanctions imposed on Russia by Western countries, some multinational companies have announced plans to withdraw from Russia or freeze new projects in Russia, and they have suffered losses themselves. Even established companies outside Russia such as McDonald's and KFC have closed their doors. Recently, Putin ordered new countermeasures: debt repayment in the ruble before the sanctions; stopped paying royalties to Western technology companies; and imposed export controls on "unfriendly countries and entities." In response, the United States has upgraded the corresponding sanctions, threatening companies, including China's SMIC, to stop exporting chips to Russia, otherwise they will face sanctions.
On March 1, the Russian "Izvestia" quoted a number of Russian business people as saying that the Russian government's measures to temporarily restrict foreign enterprises from withdrawing from the Russian market are actually freezing the assets of foreign enterprises in Russia, so that foreign investors can continue to do business in Russia. The article pointed out that this move is aimed at protecting the country's capital market and to some extent curbing inflation. After the conflict has eased, the restrictions may be adjusted or lifted. Russian National Energy Security Fund expert Mitrahović believes that it is not easy for foreign companies to leave Russia now. Some foreign energy companies originally wanted to sell their assets in Russia, but the final solution may be to sell them to Russian companies at a discounted price. Jerekina, an expert at the Russian State University of Oil and Gas, believes that the withdrawal of foreign investors from Russian projects will damage the international business environment and will pay reputational costs.
The development of any country is inseparable from economic circulation, but under the pressure of ideology and security, enterprises must take sides. Compared with some Western companies that choose to "leave Russia", many South Korean companies have said that they cannot abandon the Russian market. South Korea's "Asia Economy" reported on March 2 that LG Electronics' factory in Moscow is still producing home appliances normally, and the nearby Samsung Electronics factory is also producing television sets normally. A similar attitude is held by Japanese companies. According to the Japan Broadcasting Association (NHK) website reported on March 2, Honda decided to suspend the export of cars and motorcycles to Russia. Honda has no plant in Russia, while Toyota and Nissan's plants in Russia are still operating normally, but they are facing difficulties in supplying parts. The head of a Japanese auto giant confessed, "Once the inventory is exhausted, we can only stop production." Sanctions against Russia are global, and even China's ByteDance's TikTok has carried out actions to block russia's two major state media broadcasts. In the era of globalization, the impact of mass investment and trade, and the divestiture of industrial chains is global, and Russia's globalization "depression" swallows up not only real wealth but also the expectations of global economic growth.
Financial index markets are important indicators of the process of globalization. The MSCI Emerging Markets Index, one of the most important references and benchmarks for global stock market traders, said it would remove Russian stocks from its widely tracked emerging markets index and warned that the country's stock market had become "uninvestable," a major blow to Russian listed companies. At present, Russia has suffered from "exclusion" and "decoupling" from various economic forms, and this exclusion may be irreversible in the short term. Russia, the country with the largest land area, has the potential to become a new "depression" in the global economy, leading to supply chain disruptions and worsening multilateral debt. When war begins, the contracts and international laws on which internationalization is based become empty scraps of paper. One of the main points of Putin's economic policy was to open up the highly monopolistic economic categories of the former Soviet state and attract international capital development, but the economic achievements of the past 20 years have completely failed in about two weeks because of Putin's military actions.
Theoretically, Russia's vast territory holds the world's largest natural wealth, and its advantages are unmatched by any country. But it is a tragedy for the Russian state to be abandoned in a short period of time by a global multinational corporation representing the mainstream from a globally important source of raw materials and markets. This shows that although war, which involves the right of internal affairs and sovereignty of countries, belongs to the state, every country may be an atom in the process of globalization, and only if the atoms do not "collide" fiercely, can there be a smooth interconnection of globalization, and once the atom collides, the specific atom may face structural isolation and exclusion.
If globalization is reversed, the first event is the global spread of COVID-19; the second is the sanctions imposed on Russia by multinational corporations. The former is catalyzed by natural forces, while the latter is the resentment and panic created by human beings based on geopolitics, all of which bring about the damage to the welfare of ordinary people. In this view, the breakdown of international business relations with Russia shows that commerce can be cut off, that trade does not fully bring international peace, and that the interdependence of commerce does not necessarily lead to national trust in the security field. In addition, various alliances and transnational lobbying forces may lead to the fragmentation and tearing of the market.
Putin believes that sanctions against Russia amount to a declaration of war on Russia. However, when the world's major multinational corporations and international organizations are far away from a country, they must regard the country as a "cultural other" and a "different" market. Under the intimidation of the Putin government, many multinational companies resolutely decided to abandon the Russian market and cut off their business. The spillover effect of the war is currently the most direct flow of refugees to Poland in Europe, dispersed to other countries, and more than one million refugees have now flowed to Europe. This is different from the previous entry of Syrian refugees into the European Union, European countries have great sympathy for Ukrainian refugees, but conflicts between refugees and local people are inevitable, and the relevant division of responsibilities may lead to intra-EU conflicts or affect regional economic processes.
The United States led the largest economic sanctions against permanent members of the United Nations Security Council in human history and adjusted its foreign policy accordingly. The Biden administration has begun to attach importance to South America's oil and gas resources, and for practical reasons, relations with Venezuela and other countries have recently improved. Objectively speaking, the United States itself is an important energy production and export trade power, and the adjustment of Venezuela's diplomatic relations means that there will be a huge shift in US economic diplomacy, which will be a huge turn for globalization.
Under the epidemic, the original chaotic globalization is currently breaking down. As a result of military conflicts, future globalization will be divided and merged, and conflict and collaboration will go hand in hand. The trend towards decentralization and atomization of globalization is already emerging. Geopolitics torn apart by political threats and military deterrence will also tear globalization apart. Political elites do not reduce welfare by instigating wars and imposing sanctions, while ordinary people pay unequal costs for global conflict and globalization.