March 6, 2023

How Brics And The Third World Broke US Sanctions

Our leaders in Washington are behaving as if it was the 1970s again. They think that the United States is the dominant industrial country in the world, with support from most countries around the globe.

Unfortunately, neither proposition is any longer true.

The reality is that the United States depends on the good graces and bountiful production of other countries to maintain our standard of living. Further, we live in a time when at least half the globe is rejecting US Leadership. These two critical realities make our efforts to "sanction" Russia nearly impossible.

The first reality can be visualized in the following graph. It shows the US Balance of Trade for the past 30 years. As you can see, we have never been a net exporter during that entire time. That is, we've been unable to produce everything we've consumed.

America's Industrial Power began to wane immediately after Richard Nixon opened up China in the 1970s. The Asian giant quickly became our chief trading partner as American Multinational Corporations moved their plants and factories to them.

Today this presents a very odd situation when the world's most trade-dependent country tries to introduce sanctions. We can call the action we took against Russian Oil a "sanction," but the reality is that it was a "boycott." As a buyer of Russian Oil, there was little we could do, as it turned out, to prevent Russia from selling Oil to others.

We could, and did, stop purchasing Russian Oil ourselves, which had a marginal impact at best. But when a buyer stops purchasing a product, that's a "boycott." That is why CNBC recently published an article entitled: "Sanctions on Russian Crude Oil Have Failed Completely..." Of course, because they weren't really "sanctions" to begin with.

It is disturbing to think that Washington doesn't understand this. Or, perhaps it's a matter of Washington's ignoring basic economics to make political points.

However, there was a time when the United States could have instituted a "Boycott" and made it work.

In 1962 a British organization called the Anti-Apartheid Movement (AAM), with the principal support of the United States, began a boycott of goods from South Africa. The boycott sought to have all the nations in the world refrain from purchasing South African goods. As the chief advocate of the boycott, the United States convinced most of the developed world to join the effort and eventually gained the endorsement of the United Nations.

This boycott was so impactful that, in the end, it brought down the South African government. So boycotts can work, but only when you have a significant portion of the world's governments behind it.

Today it is clear that the United States no longer holds that kind of influence over the world's other nations. In just the last couple of weeks, we've seen a growing counter to America's sanctions/boycott of all things Russian. First has been the movement of China into the Russian sphere. Just last week, the leader of one of Russia's closest allies, Belarus, was feted to a State visit to Beijing. A 21-gun salute, parades, and state dinners show China's willingness to support those who support Russia.

The ties between Russia and China seem to grow ever closer. Just this week, there were rumors that Russia may now price its Oil in the Chinese Yuan. This move is in addition to Russia's utilization of the Chinese International Transactions System, CIPS. And, of course, the United States State Department has issued one warning after another to China not to sell arms and equipment to Russia. A sure sign that Chinese arms sales are likely in the works.

And it's not just China. All the BRICS Nations, including Brazil, India, and South Africa, seem ready and willing to buy their Oil from Russia. This a clear sign that the American effort at boycott is "failing" to use the CNBC term.

Combined with Africa and South America, the BRICS Nations, or the nations of the Southern Hemisphere, represent more than half the world's population. They are a growing economic force, one to be reckoned with. If things continue as they are, it may well be that Europe and the US will find Russian Oil is no longer available to be purchased. The BRICS nations et al. will have out-bid us.

In summary, when War broke out in Ukraine, the United States tried to use its economic muscle to restrain Russia. In the words of one State Department spokesperson, it was to be a campaign of economic "shock and awe." The design was to ruin Russia's economy, forcing it to stop the War. The US projected that the Russian economy might see its GDP fall by 20%. In fact, the Russian GDP declined by less than 3% and has had little to no effect on curbing their "Special Military Operation."

Our effort to boycott Russian Crude Oil has been mitigated by the willingness of the BRICS Nations and much of the third world to ignore the "sanctions" and proceed with their purchase of Russian Crude.

The Russian "Sanctions" have been broken, and now on to the China Sanctions.