How did Western sanctions affect Russia?

How did Western sanctions affect Russia?

Russian economist Sergey Glazyev gave Turkish TV channel CNN TÜRK an interview covering the topics of effects of the sanctions on Russia, changing trading profile of Russia after the sanctions, relations between Russia and Türkiye, BRICS currency, trade with local currencies and possibility of Türkiye joining BRICS.

The interview, including the introductory part, was translated from Turkish into English by UWI.

The BRICS was founded in 2006 by Brazil, Russia, India and China with the aim of developing countries having a stronger say in international affairs. It has been expanding steadily and currently represents 28% of the world economy. So, will Türkiye also join BRICS? Can the ‘BRICS currency’ replace the dollar? To what extent have Western sanctions affected the economy of Russia, the leading member of BRICS? Renowned economist Sergey Glazyev, a member of the Russian Academy of Sciences who also served in the Putin administration in the past, answered the questions of Büşra Arslantaş from CNN TÜRK.

Büşra Arslantaş: Mr. Glazyev, I’m curious about your thoughts on the impact of the Western worlds sanctions in the third year of the war in Ukraine. How have the unprecedented sanctions affected the Russian economy?

“Sanctions of the West revitalized the Russian economy”

Sergey Glazyev: Actually, you can see that these sanctions of the West have had a revitalizing effect on the Russian economy. The Russian economy is now growing quite rapidly. There was a growth of 3.6% in GDP last year. More importantly, we see an increase in investment flows, a 10% increase. Retail sales and consumption in the country have also increased by around 5%. This all means that the Russian economy is growing quite well. There is no crisis.

Another important point is that the international investment rate of the Russian economy has doubled. Russia now has more than $1 billion in assets than its obligations to other countries. I can say that the credit ratio in the Russian economy should be three times that of 8, that is to say, much higher than the credit ratio of the US and the EU.

The Russian economy responds to Western sanctions by import substitution and increasing production. We now import three times less products from Western countries. At the same time, we produce several times more than three years ago because we need to replace the products coming from Europe. We have the means and opportunities to increase production.

I should also mention that we have changed the geographical areas we trade with. For example, our trade with Asian countries has developed significantly. Products we used to import from the West are now either produced domestically or imported from Asia. Our relations with Türkiye have also improved, and our trade has doubled in the last few years.

Büşra Arslantaş: That is exactly I was going to ask. Commercial and economic ties have played a crucial role in the relationship between Türkiye and Russia for years. Russia has become one of Türkiye’s most important trading partners. What is the current situation and in which areas further cooperation can be fostered?

“We can increase cooperation with Türkiye”

Sergey Glazyev: I think we can increase cooperation in various economic sectors. Firstly, we can continue our collaboration in the energy sector. You know the nuclear power plant constructed in Türkiye. Türkiye also plays a “bridge role” in transporting Russian natural gas to the West. We also have cooperation in the machinery manufacturing sector. Türkiye is now producing many types of machinery and there is demand for these machines in the Russian market. Turkish companies play a significant role in the construction market in Russia. The construction sector grew by 6% last year in Russia, indicating a construction boom in Russia. We have numerous joint projects in the tourism and agriculture. So I am optimistic about increasing cooperation, bilateral trade, and connections in various fields.

Is a BRICS currency possible?

Büşra Arslantaş: I’m curious about your thoughts on the expansion of BRICS. How does this expansion affect the US Dollar? Is there a specific date for the implementation of a currency belonging to BRICS? Is a currency specific to BRICS possible? Would a new currency serve as a protection against the sanctions?

Sergey Glazyev: I can say this: After the illegal sanctions imposed on the Russian financial sector by the US and the EU, we had to withdraw from the Dollar and Euro. We don’t use these currencies. We do not see them as valid currencies. These currencies have been used as tools to create political pressure. Therefore, trade with the Dollar and Euro is highly dangerous. We now use local currencies in the Eurasian Economic Union. Nearly 90% of our inter-state trade is conducted with local currencies and the Russian Ruble. We have begun to use local currencies in trade with China, more than half of that is with local currencies. Likewise, that with India. Almost all BRICS countries are now using local currencies in trade.

In the latest BRICS summit, we have decided to establish the infrastructure for trade with local currencies. This infrastructure is already in place, allowing us to make payments without using the SWIFT system. All interbank information transmission systems are present at the Russian Central Bank. We also have the infrastructure to conduct transactions with all currencies. Here remains only one question: A new global currency. It is currently under consideration. These discussions are taking place at the expert level. We have reached a new model in our talks with experts, although we are not yet at the political stage. We propose a new international digital currency to be used in foreign trade.

We had two main objectives in this proposal.

The first is the currencies of the countries involved in this payment system, and the second is the commodity market. The balance between these two markets will form the foundation of a stable international currency. We intend to use this currency in international trade. Now this new model is in the discussion stage. That is one of the approaches. The second approach is to promote trade digitizing local currencies. Almost all central banks of BRICS countries have announced that they applied to digitalize local currencies. These digital currencies can also be used in international trade. Currently, we have two different models for our trade and cooperation using local currencies.

Alternatively, we could create a new international currency that is convenient, flexible and accessible for everyone to use in international trade. BRICS countries need to establish this new financial architecture and infrastructure. We should wait for new sanctions to come. We should create our own trading system and set our price systems because BRICS countries are the main producers and consumers of commodities. The next step will be to establish mechanisms to determine commodity prices to prevent Western speculation.

We want to create a stable, accessible and convenient market for countries seeking new economic developments. BRICS countries are at the center of this economic leap.

Türkiye joining BRICS?

Büşra Arslantaş: I like to ask one final question: In 2018, President Erdoğan participated in the BRICS summit hosted by South Africa, and there were claims that Türkiye could join BRICS. Do you think that is possible?

Sergey Glazyev: Why not? I believe Türkiye is a very good partner. I think Türkiye could help us build a developed economy. Whether Türkiye joins BRICS or not is up to your country. I want you to see that the door of BRICS is always open. Many countries joined BRICS last year and this year. Russia holds the presidency of BRICS this year, I believe it is a very good time to have these discussions.

Büşra Arslantaş: Thank you, Mr. Glazyev, for taking the time.

Sergey Glazyev: Thank you.

United World International

Independent analytical center where political scientists and experts in international relations from various countries exchange their opinions and views.

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May 2024