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US must be careful – sanctions on Moscow not effective

President Donald Trump
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At a time when the American democracy is under pressure from partisan politics between Republicans and Democrats, the country’s global influence is fast diminishing.

President Donald Trump’s foreign policy remains incoherent, domestic wrangling have become the order of the day, governance is suffering, the people’s faith in their public representatives is at its lowest and the government shut-down for just over thirty-five days is the longest in US history.

US-led sanctions against Russia are failing to bite and actually fears are that they are beginning to hurt Washington more. Speaking at the World Economic Forum (WEF) in Davos, Switzerland, the Russian Direct Investment Fund’s CEO Kirill Dmitriev said in an interview: “Of course, we believe sanctions are wrong. And particularly US sanctions, because they really undermine the US long term.”

Dmitriev argued that although the European Union (EU) was part of the US joint sanctions imposed in 2014, the Russian economy is growing at two percent annually and oil prices were satisfactory. He said the Russian people had become accustomed to living amid sanctions and “frankly it’s a way of doing business”, Dmitriev said.

What is interesting is that despite the continuing Western sanctions against Moscow, foreign direct investment and economic partnerships between Russia and other countries continue to thrive.  A multi-billion dollar deal for aircrafts and arms has been entered into between Russia and India and trade turnover between the two BRICS member-states is set to triple by 2025. Moscow is in the process of building a multi-billion dollar nuclear plant in Turkey around 2023 and multinational companies such as Coca-Cola, Pepsi and McDonalds, among others, are quietly present on the Russian market. In spite of the EU sanctions, Russia’s export of its locally-produced solar panels to the rest of Europe is on the rise.

According to Dmitriev, 30 new American companies opened operations in Russia in 2018 alone. He added: “We have partnerships with 20 top sovereign wealth funds, we were able to generate keen returns on dollars every year for the last seven years, and they are actively investing with us.”

Methinks that at a time when the world has shrunk and become one global village, the rise of inter-dependence means that political differences are better resolved politically instead of bringing in economics. Bread and butter issues are the glue that brings nations together. As things stand, international corporations have long developed strategies around how best to circumvent inconveniences such as sanctions, which are invariably imposed without the consent of big business.

Russia has a whopping 75 trillion dollars in resources, which they use as a buffer against sanctions, hence they cannot bite. But as the hostilities grow between the West and Moscow, Russia has now resolved to shift no less than 100 billion dollars of its reserves into yuan, yen and euro as part of a global effort to reduce the international dominance and dependence on the US dollar. Recently, India and the UAE entered into an agreement to ditch the dollar in their bilateral dealings and henceforth trade strictly in their local currencies.

Under the Trump administration the US has seen its foreign policy confused and haphazard, a far cry from the position of previous administrations. The deficit in the legitimacy of the government has shot up in recent times, the US influence in multilateral bodies is dwindling and above all, the country’s debt is said to spiral to 22 trillion dollars, according to former Fed chair Janet Yellen.

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