Opinion: Globalization has become a tool of blackmail, and Russia has highlighted its weaknesses

In 2021 Lukoil was one of the most successful private companies in Russia. The international energy company, whose management is located in Moscow, was ranked by Forbes magazine as the 99th largest in the world. A year earlier, in 2020 the company generated about 2% of world oil production, and generated about $ 78 billion in revenue. In that year, its assets were valued at $ 82.8 billion. Until last October, the company was trading in London and Moscow at around $ 105 per share, at a market capitalization of over $ 40 billion. That all changed in two weeks.

Last week, when shares could still be traded, the price was set at $ 0.72. 99.3% collapse. This is even though the company is not prevented from selling oil in China or even the United States. The company also has a debt of about $ 7 billion in bonds. On the last day of trading in bonds, they wrote off almost 70% of their value. This is the situation of one of the most powerful companies in Russia, engaged in the least vulnerable sector of energy: total loss of value, insolvent bonds, disconnection from financial markets, loss of knowledge, and massive loss of markets and revenue.

Imagine the condition of the ordinary companies traded on the Moscow Stock Exchange until it closes. Russia’s bond and stock markets have entered a deep stalemate, and with them the companies’ hopes of raising funds and credit. Most of the capital of the Russian middle class, as well as of foreign investors in Russia, was also wiped out.

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Flights will be phased out, the grip on the east may be undermined

The immediate and severe sanctions imposed by the West on Russia have cut it off from the world economy, but also from the world’s temporary and leading technologies. Everything stopped at once. From cloud services, to the knowledge of the major oil companies.

The boycott of oil purchases, which Biden announced earlier this week, could also have dire long-term consequences for the Russian economy. Russia has a limited storage capacity of about 80 million barrels of oil. A few months of boycott, and storage facilities will be filled. Russia will then be forced to stop drilling. Resuming drilling after stopping it is not like opening a faucet in a sink – it involves a long time and significant losses.

Two-thirds of Russia’s civilian aircraft are made by American Boeing and European Airbus. Most of them, and especially the engines of those aircraft, belong to European leasing companies. Under the sanctions laws, these leasing companies are required to take ownership, by the end of the month, of the aircraft and engines belonging to them. If that was not enough, Boeing and Airbus have announced they will stop any service or supply of spare parts for Russian-owned aircraft. For these reasons, last week the Russian national airline – Aeroflot – announced that it would discontinue all its international flights by the end of the month.

Without spare parts and service, domestic flights will also be discontinued gradually. Russia is the country with the largest territory in the world. Its area exceeds 17 million square kilometers, of which about 13 million square kilometers in Asia and about four million square kilometers in Europe. The territories in Asia are hours of flight from Moscow. Without orderly air travel, Moscow’s grip on the far-flung provinces of Asia, which are closer to Beijing than to Moscow, could also be undermined.

Not only does money become decentralized, but so do sanctions

The economic boycott is special not only in its intensity, but also in terms of those who initiate it, and those and its participants. This is the first major boycott in the age of social media. For example, the story of a 19-year-old young man from Florida who follows and posts on Twitter about the movement of the private jets of Russian oligarchs close to Putin. In a short time he gained 400,000 followers. These, watch the short videos he publishes showing Putin’s friends with his luxury planes, while Russian soldiers shoot at civilians and destroy Ukrainian cities, and share them with others.

Like him there are many others, on Twitter, Facebook, Telegram and WhatsApp. Millions of ordinary people exposed to videos and messages. From here it is a short way to emails or slack messages to the CEOs of the companies they work for or buy from, demand to take action immediately. Last Friday it was announced that the American energy company SHELL purchased 100,000 tons of crude oil from Russia at a significant discount. , And announced that it would contribute its profits from acquisitions in Russia to humanitarian activities in Ukraine, and that it would try to find alternative sources of Russian oil.

Modern globalization joins the immense power of social networks and now brings to Russia, live, fast and brutal, the culture of “cancellation” of America. No longer just politicians in Washington, the power has moved no less, to the digital city square. From the oligarchs to the boycott of sports teams, sanctions and boycotts come into the world as a result of private initiative no less than the actions of governments.

There is an important lesson here and a bright warning light for Israel. For years, AIPAC, the Israeli lobby, has been at the forefront of pro-Israel influence in Washington. But no more. In the new world, the support of leaders is no longer sufficient, and financial contributions to politicians will no longer do the job. Before us is born a new, appallingly effective sanctions movement, which is not led and obeyed by the leaders, on the contrary it is the one that leads them. This movement can also not be removed, stopped or canceled according to the instructions of those leaders. This is the power of decentralization. From now on not only money becomes decentralized but also international sanctions.

Food supply in Russia is failing, but so is globalization

The invasion of Ukraine took the circles of time back decades. Again in supermarkets in Russia you can see a shortage and restrictions on buying, even of basic products. Lanta is one of the largest public retail companies in Russia. The company operates hundreds of branches and employs about 50,000 people, mainly in urban centers. A few days ago she announced that she would limit each customer to purchase up to ten products per visit to the store. In doing so, the company joined similar restrictions imposed by a company called X5, Russia’s largest food retailer. X5 is a public company that is lacking in London and Moscow and employs 340,000 people. In 2020, it recorded revenue of $ 27 billion.

But the harsh sanctions do not only disrupt the order in food stores in Russia. They also disrupt the world order, that is, globalization, which has begun to flourish since the early 1980s. Globalization has brought to the world an openness, trade and flow of knowledge like no other, which has not existed since before the First World War.

This globalization has enabled hundreds of millions of Chinese to produce and sell cheaply in America, and has also given Russian, Chinese, Israeli, and other companies access to Western capital markets. It has lowered customs walls and barriers to trade, and the economic efficiency it has brought has raised the standard of living in many countries, especially in developing countries. For example, China’s GDP increased from $ 205 per person in 1980 to $ 10,500 in 2020, more than 50 times.

Globalization also brought with it difficulties, especially the heavy burden on the working class, and the lower-middle class in the United States, which had to compete with the cheap labor in the East. Over the years, this heaviness began to affect American politics. All the way to the White House on top of slogans of “America First,” aggressive rhetoric toward China and free trade.

Upon his inauguration, a trade war broke out between China and the United States. This was followed by restrictions on trade and the transfer of knowledge, and various types of tariffs were imposed. The government and state budget will be directed almost exclusively to American companies and manufacturers.

The American supplier and the common lesson for China and Europe

Globalization underlies international cooperation for the widespread, cooperative, and efficient use of resources, depending on their physical location and relative advantages. But globalization cannot coexist with aggression and international violence. Then, it becomes a tool of economic efficiency to a tool of blackmail, as the Europeans now know.

Trump supporters in support demonstration / Photo: Associated Press, Wilfredo Lee

Trump supporters in support demonstration / Photo: Associated Press, Wilfredo Lee

The corona has also eaten away at globalization. The severe disruptions in international supply chains, and the natural preference of governments for their citizens in times of crisis, have been a wake-up call for many. Fears of China’s geopolitical aspirations, reflected in an ongoing policy of huge investments in its military might, as well as the deployment of the renewed navy in the South China Sea, have led America to further doubts about globalization. Rising wages and prices in China also affected viability considerations.

Together, these have led to an increasing process of returning industrial production, and especially that related to technologies, to America. For example, in early 2021, chip giant Intel announced a $ 20 billion investment in a giant chip plant in Ohio. Technological developments in the fields of automation, robotics, and artificial intelligence (AI) are making such a return even easier, as dependence on cheap labor in the East is dwindling.

Russia’s invasion of Ukraine, and its vigorous Western response, have once again demonstrated the weaknesses of globalization and contributed to the impetus for an end. China will surely write off Russia’s sanctions, and will seek to reduce its dependence on the West in general, and its payment and financial systems in particular. A similar process is going on in Europe, which is currently building a plan to cut 80% of its dependence on Russian oil and gas this year. Russia, meanwhile, is threatening 300 barrels of oil and a complete shutdown of gas supplies to Europe. But this is a dangerous cry of despair, as it only illustrates and urges Europe to get rid of once and for all, and quickly the blackmailer within its borders.

When Putin moves to the next level, it will be dangerous not only for the people of Ukraine

Recent events surrounding the war in Ukraine will hasten the anti-global trends of the last decade, but the main sufferers will be countries like Russia and China. The United States, by contrast, is virtually dependent on imports, is the largest oil producer in the world, more so than Russia, China and the principalities combined. It is one of the largest food producers in the world, and the largest and most efficient per person. In the territory of the United States and Canada more than 21% of the fresh water on earth, and when it comes to technology, the United States and its allies in the West are not dependent on Russia or China at all. Could lead to real famine in Russia and China.

Russian forces suppress anti-war demonstration in Russia / Photo: Associated Press

Russian forces suppress anti-war demonstration in Russia / Photo: Associated Press

Putin’s Russia is a country with no future and no economy, which also suffers from accelerated aging. Already about 30% of its population is over the age of 55 and only about 18% under the age of 14. Russia’s young people, especially in the big cities, which are also the future of the country and the avenue of future civic and technological leadership, understand this well. That is why they are congesting the trains, the last land connection for those who want to leave Russia these days. Take with them what little is left of her future and hopes. Thus, a place on the train from St. Petersburg to Helsinki, the almost last connection out, which in the days when the repair cost about $ 60, is not available weeks ahead, and tickets on the black market have already climbed to prices of $ 7,500 to a single place.

Putin is an older man, almost 70. A “boomer” of the last century, living in the world of the concepts of the Cold War and World War II. As such, he has limited knowledge in relation to the real world in which he lives. He therefore fails to understand that in the networked and connected world, and in the age of the global village, no country is too big, too independent or too strong, that can evade the wrath of the masses. As a “boomer” sitting far away even from his senior generals, he is now in the first stage of the mourning process: denial and isolation. He will soon move on to the next stage: anger. And this will be the most dangerous moment of all, and not just for the poor residents of Russia and Ukraine.

The writer is a lawyer by education who deals with and is involved in technology. Manages an investment fund in cryptocurrencies, and lives in Silicon Valley. Author of the book “A Brief History of Money” and recorder of the KanAmerica.Com podcast

By Editor

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