‘Sanctions Tsunami’ and ‘Economy of Distrust’: Second Day of the Valdai Discussion Club Annual Meeting
Moscow, Russia

On Tuesday, October 25, the 19th Annual Meeting of the Valdai Club continued. On this day, three sessions dedicated to economic topics were held; in addition, the Club's experts met with high-ranking representatives of the Russian authorities. 

At a meeting with Russian presidential aide Maxim Oreshkin, the Valdai Club experts discussed the economic war unleashed by the West against Russia and the reasons why the Russian economy manages to survive despite unprecedented sanctions pressure. Oreshkin also shared his views on what could serve as a more just global economic model; one which could open up opportunities for countries to pursue joint development independently and without the dictates of the West. 

The third session, titled "Economic Warfare as a Defining Trend in Global Development," was open to the media; the recording of the broadcast can be viewed on our website. The main target of the economic war is Russia, but the entire planet feels its consequences. The Western (above all, the American) elites have an ingrained notion that the so-called sanctions (which would be more correctly called unilateral restrictive measures, since legitimate sanctions can only be imposed by the UN Security Council) are a cheap and politically acceptable alternative to war, and that they are easier to “sell” to the electorate. It is actually a form of war that kills people in the same way, said Radhika Desai, Professor at the Department of Political Studies of the University of Manitoba (Canada). There are no "smart" sanctions, confirms Carlos Ron, Venezuela's deputy foreign minister for North American affairs. Their goal is always to provoke popular dissatisfaction with the government, and for this, it is necessary to make people's lives worse.

According to Anastasia Likhacheva, Dean of the Faculty of World Economy and International Affairs at the National Research University Higher School of Economics, the peculiarity of the “sanctions tsunami” of 2022 is that for the first time, sanctions have delivered a powerful ricochet to their initiators. In the case of Russia, unlike Iran and Venezuela, the West has failed to isolate a significant segment of the world economy.

Today, the conditions for development for billions of people are fundamentally changing, Likhacheva emphasized. An "economy of distrust" is emerging - to new partners and old systems the search for "our guys" begins - for those who can be trusted more. The economy of distrust changes the entire structure of international cooperation.

An illustrative example of the reaction to the “sanctions tsunami” was the intensification of Russian-Indian economic ties, especially in the energy sector. D.B. Venkatesh Varma, Ambassador Extraordinary and Plenipotentiary of India to Russia in 2018-2021, noted that his country’s consistent position is to refuse to condemn Russia in the UN, maintain normal trade and economic relations and strive for peace. Sanctions are initiated by bureaucrats in Washington and Brussels, he added. They know how to start them, but they have no idea where they lead.

The fourth session was devoted to energy and food security: areas where man-made crises erupted in 2022. Enough food is produced in the world to feed everyone, the experts noted; the problem is in its distribution. Today, the threat to the food security of mankind is the growing disparity in prices between the market of Russia and other countries. Meanwhile, companies from Europe and the US receive direct instructions not to service Russian exports, which is an irrational and unethical decision. Barriers to trade are erected which contradict the rules of the WTO; for the sake of a nation’s ego, they will unbalance the markets. 

In general, there are three main groups of causes of global hunger: armed conflicts, economic upheavals and the negative effects of climate change. As for the last point, Russia is one of those countries that could theoretically benefit from global warming because it would boost the country’s agricultural production and exports. While this does not eliminate the need for climate change mitigation, but it is more correct for Russia to focus on measures such as carbon sequestration and reforestation. 

The current energy crisis in Europe is completely man-made. Due to Western sanctions, Russian gas exports to Europe are a mere fifth of what they were last year. There are free gas production capacities - it is necessary to understand how and to whom to sell them. According to experts, it makes sense to bet on LNG, ammonia and methanol production. Building a gas hub in Turkey is the right idea, one of the participants noted, but investing in big new gas pipelines means falling into the same trap.

The fifth session of the conference was dedicated to the crisis of globalisation and global governance institutions. Globalisation - as well as deglobalisation - cannot be seen in isolation from the role of the United States in the global economy. After the Second World War, the US had half of the world’s GDP and benefited from free trade. As the share of the American economy shrank, the US turned to protectionism. 

According to one of the experts, there are two visions of the global system: one based on UN rules and the other based on the American understanding of its own exceptionalism. Since the end of the Cold War, a neo-conservative ideology has dominated in the US, based on the belief that Washington can do whatever it wants. The most dangerous aspect of this ideology is its reliance on alliances as the basis for American dominance. Meanwhile, the UN and its Security Council may have many shortcomings, but there is nothing to replace them. The institutions of the Bretton Woods system discredited themselves, the participants of the session noted, and the UN Charter is the only reference point in the development of rules for the international system.

At the end of the second day of the conference, the Valdai Club experts met with Deputy Prime Minister of the Russian Federation Alexander Novak and discussed the energy policy of Russia and the Western countries in the context of the “sanctions tsunami”. Novak spoke about the situation on the world energy markets and about the prospects for Russia's cooperation with international partners, including within the framework of the OPEC+ deal.