After the Ukrainian war, Europe sanctioned Russia for inflicting economic and financial damage on Moscow. Ironically, Europe has risen to its own firecracker. Russia, which was declining from the world stage, economically and as a major power, exploded.
Russia’s economic renaissance
Russia, which has been widely described as being devastated by the war in Ukraine, is enjoying a miraculous rise.
Russia’s defense manufacturing industry is booming to unprecedented levels. The reality is that following the war in Ukraine and the opening of another front by NATO by proposing the membership of Sweden and Finland, the Russian defense production industry is stressed and overloaded.
Russia is now using Kazakhstan as a defense manufacturing base for itself. It would be a win-win scenario for both nations. The deal will ease the burden on Russia’s defense industrial complex. It will also help Moscow maintain its image as a major defense exporter to the world.
Moreover, the occupation of Ukrainian territories led to a massive accumulation of wealth for Moscow. Washington Post estimated the sum to be a staggering “$12 trillion”. This considerable sum arrives in Russia by seizing 41 coal deposits from Ukraine, 27 natural gas sites, 14 propane sites, nine oil fields, six iron ore deposits, as well as several sites of titanium, zirconium, strontium, lithium, uranium and gold. The accumulated wealth would then be used to build infrastructure that would yield huge returns.
In addition, the labor shortage was interrupted by labor from the Donbass region. Thousands of people have been displaced from eastern Ukraine to the Russian Far East. Now, Russia’s untapped natural resources in the Far East would be used to their full potential, opening new economic doors for the Kremlin.
Moscow’s growing geopolitical influence
Russia, which was declared a “world power in decline” after the disintegration of the USSR and due to slow economic growth, is witnessing wonder in the aftermath of the Ukrainian war.
Countries like China, India and several others came to its rescue when they faced possible consumer extinction for its oil exports. There is a huge dedollarization moment led by Moscow. We are witnessing a reinforced and sophisticated partnership with India, China, Iran, the countries of Southeast Asia and Africa. Countries are increasingly looking to trade in local currencies rather than dollars. Several countries like Iran, Turkey and Egypt are adopting Russia’s MIR card payment system. These countries will largely be the beneficiaries of defense imports from Russia.
Moreover, the exodus of foreign companies from Russia has launched a new movement in support of local businesses in the country. Local brands have replaced global brands. These brands will compete globally in the years to come, which will in turn contribute to Russia’s economic activity in the long term.
Also read: EU’s groundbreaking peace offer to Iran and Russia marks end to war in Ukraine
The mortifying EU decision
Well, the West couldn’t stop Russia’s economic rise, so it took a notorious step to save face. The European Union has now banned reputable credit rating agencies (CRAs) from rating Russian corporates and sovereign debt.
Failure to follow the same would entail the risk of losing their licenses to operate in the EU. Shortly after the draconian directive, the three international credit rating agencies like Moody’s, Fitch, and S&P withdrew all of their commercial ratings on sovereign, corporate and other forms of Russian ratings, including closing their offices in Moscow.
This amply demonstrates the disproportionate control of Western nations over major players in global financial markets, which poses a huge risk of manipulation.
Thus, it can be argued that the politically arbitrary response of foreign credit rating agencies caused the Russian government’s plummeting downgrades by six notches in less than 15 days rather than driven by risk fundamentals.
Many reputable international organizations, such as JP Morgan and the IMFexplicitly stated that the Russian economy is doing better than expected despite the war in Ukraine and Western sanctions.
Yet, as the quote says,“You can’t hide the sun with your hands and assume it’s not there,” global investors cannot be fooled by sold-out rating agencies.
The fact is that Russia is standing tall and has started to flex its economic muscle. This rise could be glorious and could even challenge Europe’s economic dominance in the near future.
African Peer Review Mechanism (APRW)which is an organ of the African Union, criticized the cowardly approach of the European Union and, therefore, it can be said that the AU also took a stand.
The EU has issued a directive banning the “top #creditrating Russia’s rating agencies and Russian companies as part of its sanctions package against Russia’s invasion of Ukraine,” otherwise they risk losing their licenses.https://t.co/Ty0Ho4TGxm pic.twitter.com/o9KRD0QgnV
— African Peer Review Mechanism (APRM) (@APRMorg) September 2, 2022
Europe’s decision not to let credit agencies rate Russia is completely cynical. He buried his head in the sand like an ostrich. Russia’s growth will eventually increase and ignoring it would not change the current situation.