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42 I Cover story bne September 2022
The economic war with Russia has
already cost the West $380bn
Ben Aris in Berlin
The economic war that the West
launched against Russia in the
days following the invasion of Ukraine has already cost developing nations $379bn, analysts estimate.
The figure is based on an assumption that Western governments are collectively burning through $2bn a week to cope with elevated commodity prices and losses caused by slowing economies during the six months the war has been going on, reports the Japan Times.
Reserves exhausted this year in crisis fighting represent less than 6% of total holdings, according to data from the International Monetary Fund for 65 developing nations, but that is the fastest drop since a 2015 currency meltdown led by China’s surprise devaluation. Ghana, Pakistan, Egypt, Mongolia, Bulgaria and Turkey are in the front line, having all lost a third of their reserves this year, according to
the IMF, and all are having currency crises as a result.
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Soaring bond yields and a $215bn wall of global debt payments due by the end of 2023 are set to worsen the situation over the next year, especially if interest rates continue to rise. Governments were already in a difficult position after balance sheets everywhere were strained by heavy social spending during the global pandemic that
with a “massive package” of sanctions following its attack on Ukraine on February 24, which are designed to “undermine Russia’s economic base”.
“The sanctions will target strategic sectors of Russia’s economy. We will freeze Russian assets in the EU and stop access of Russian banks to our financial
“Soaring bond yields and a $215bn wall of global debt payments due by the end of 2023 are set to worsen the situation over the next year”
started in 2020. Now all that has been made worse by problems created by the escalating economic war between Russia and the West.
Within days of the invasion, EU Commission President Ursula von der Leyen said Europe will hit Russia
market. This is designed to take a heavy toll on the Kremlin’s ability to finance war,” von der Leyen said at the time.
Sanctions are usually a tool of diplo- macy used to try to cajole a wayward government to change its ways. Von der Leyen made it clear these sanctions