With Russia being slammed with one economic sanction over another since Vladimir Putin launches an unprovoked invasion of Ukraine, Nobel Prize-winning economist Paul Krugman said any hope that the Russian president has that China will step in and help shore up his country’s increasingly shaky economy is a pipe dream.
With President Biden announcing the U.S. will ban the importation of Russian oil -- a substantial component of Russia's economy -- Krugman noted in his New York Times column that what Russia needs, China can't give them even if they wanted to which is still to be determined.
On Tuesday the Times reported that it may take years for Russia oil industry to get back in the game --particularly if Putin remains in power -- Krugman claims other industries in the country are facing their own collapse.
After beginning, "In deciding to invade Ukraine, Vladimir Putin clearly misjudged everything. He had an exaggerated view of his own nation’s military might; my description last week of Russia as a Potemkin superpower, with far less strength than meets the eye, looks even truer now," the economist posed the question, "Can China, by offering itself as an alternative trading partner, bail out Putin’s economy?" and then bluntly answered, "No, it can’t."
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Noting that international bankers are now out of Russia's reach due to sanctions, Krugman sarcastically explained, "it’s hard for Russia to pay for imports — sorry, but you can’t carry out modern international trade with briefcases full of $100 bills."
Writing, "The Russian elite can live without Prada handbags, but Western pharmaceuticals are another matter. In any case, consumer goods are only about a third of Russia’s imports. The rest are capital goods, intermediate goods — that is, components used in the production of other goods — and raw materials. These are things Russia needs to keep its economy running, and their absence may cause important sectors to grind to a halt."
Posing the question over whether China can fill the gap, Krugman dashed any thought of it.
"First, China, despite being an economic powerhouse, isn’t in a position to supply some things Russia needs, like spare parts for Western-made airplanes and high-end semiconductor chips," he explained before adding, "Second, while China itself isn’t joining in the sanctions, it is deeply integrated into the world economy. This means that Chinese banks and other businesses, like Western corporations, may engage in self-sanctioning — that is, they’ll be reluctant to deal with Russia for fear of a backlash from consumers and regulators in more important markets."
More importantly, he notes, as one of the world's few superpowers, China has little incentive to prop up Russia.
Putin may dream of restoring Soviet-era greatness, but China’s economy, which was roughly the same size as Russia’s 30 years ago, is now 10 times as large," he explained before writing, "So if you try to imagine the creation of some neofascist alliance — and again, that no longer sounds like extreme language — it would be one in which Russia would be very much the junior partner, indeed very nearly a Chinese client state," and then needling Putin once again with, "Presumably that’s not what Putin, with his imperial dreams, has in mind."
"China, then, can’t insulate Russia from the consequences of the Ukraine invasion. It’s true that the economic squeeze on Russia would be even tighter if China joined the democratic world in punishing aggression. But that squeeze is looking very severe even without Chinese participation. Russia is going to pay a very high price, in money as well as blood, for Putin’s megalomania," the economist concluded.
You can read his entire opinion piece here -- subscription required.
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