The far-reaching consequences of a second cold war extend beyond the borders of Russia and Ukraine, threatening global recovery. The simmering conflict in the Black Sea has now flared up. Russia launched a full-scale invasion of Ukraine on several fronts, and in retaliation, the U.S. and the European Union (EU) announced another round of extreme sanctions, including banning Russia’s major banks from using the SWIFT system. Russian ambitions at this stage paint many scenarios, all far from rosy for the world economy and for net commodity importer countries, in general. But for Russia, the EU's reliance on the country’s fuel provides it with great leverage to withstand the sanctions. Moreover, Russia and its allies in Asia (mainly China) could seize the opportunity to bolster their non-dollar denominated trade and financial ties, by using SPSF, the Russian equivalent of SWIFT, or by accelerating the use of China’s CIPS system to cushion the effect of losing access to SWIFT.
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Mona Bedeir
Chief Economist
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