Sapa and the Global Economy
While sapa is having a nice time with the global economy, Russia’s economy is growing fat and healthy. Nigeria’s economy would have been dining at the same table as Russia’s. The probe becomes: what is Russia doing right?
Russia’s Ruble is the only currency in the world that has gained more value despite the war threats and even amidst the myriad of sanctions from the EU 🇪🇺 and “World’s Police”-US Government 🇺🇸.
Energy has become more expensive globally, and its effect on the global economy and the financial state of things cannot be overemphasized.
Before the invasion, Russia’s currency was at 81 rubles per $1. But today, $1 amounts to 61 rubles. The sanctions were supposed to render Russia’s currency useless. But the reverse is the case.
We’ll probably be having a different conversation if the President of Russia, or the President of the Central of the Russian Federation, was either Shadrach, Meshach, or Abednego. But none of them answers any of the aforementioned for a name.
Is Russia the cause of the financial crisis in the world today?
The answer is a “no”—a very fat “no,” even though Russia has the world’s largest natural gas reserves. But the world will need to make Russia 🇷🇺 happy, for ease to beam its bright teeth at the global economy.
Just recently, Russia cut its supply of natural gas to Europe by a whopping 88%. Even Europe’s economic heavyweight (Germany 🇩🇪) is at the mercy of Russia, probably because the whole of Europe 🇪🇺 depends on Russia 🇷🇺 for natural gas. Russia 🇷🇺 supplies over 40% of the natural gas in Europe.
Germany 🇩🇪 being the largest importer last year is suffering from an acute shortage of energy at the moment.
Well, the billion-dollar question becomes, what is Russia doing right?
- Monetary Policy: Russia’s central bank enforced a policy to control measures that increased demands for Rubles. The policy is that 80% of business capital remains in Russia’s ruble instead of the US dollar or euro.
- They ensure that gas payments are in Rubles. Before the invasion, Russia accepted euros as a means of payment for the gas it supplied. But it changed after they were bashed with several sanctions following the invasion of Ukraine.
- Revolutionised import controls. By default, if you import more, you need the US dollar. This means you need US dollars to buy from the international market. But Russia turned this around. They cut down on imports just like South Korea did in the 1950s which birthed the new South Korea 🇰🇷.
Despite the US threat of sanctioning any country that ignores the price cap, it also looks like Russia will also ignore the second-order effect of the global price cap because Russia has also said it will not export to countries that comply with the price cap.
Just a couple of days ago, Japan 🇯🇵 was forced to sell off some US dollars from its reserve for the Japanese yen to gain a little value, as it was becoming helplessly valueless against the USD.
Conclusively, while the global economy is in a mess partly due to the monetary policies of central banks across the world and due to the shortage of energy, the US dollar can no longer sustain the world’s economy just as it used to. The earlier we accept the need for a new global reserve currency, the better for us.
Author: Solomon Oluwaseun Olukoya
Contact: [email protected]; +2347030313860
