Sanctions never work

pic by AFP

TRADE wars do not work, and you don’t have to consider each and every economic sanction a catastrophe, forever murdering your business. In most or all cases economic interest will break down all artificial walls designed to strangle one business group (or nation) and give preference to another.

That’s the conclusion from the spectacular case of German technological giant Siemens AG, that is ready and willing to localise in Russia all the production of its biggest turbines for power stations.

The split of the Soviet Union in 1991 has led to many losses, including that of Russia’s ability to produce such turbines. We can only do the smaller versions of up to 25MW. Siemens produces ones that are seven times more powerful.

The news about the Germans’ readiness to localise its turbine production in Russia and transfer all the needed technologies, is easily our biggest economic sensation these days. The thing is, it was Siemens that got itself into a huge Russian scandal in 2017 and the company could have left the country.

The problem was with Siemens’ super turbines for two power stations in Crimea. Any supplies to Crimea were supposed to be under American and European sanctions after the return of the peninsula, where 96% of voters asked in 2014 to get out of Ukraine and rejoin Russia.

Russia got back a Crimea with its economy dilapidated (one of the reasons for such an outcome of the vote). The lack of energy was probably the biggest problem.

So, a Russian company bought the turbines from Siemens and then installed them in brand new power stations in Crimea. The scandal could have led to Siemens being pressed into getting out of Russia altogether. The result, as we see it now, is exactly the reverse.

Why so: The waves of Western sanctions in 2014 and ensuing years have led Russian leadership to the idea of ensuring our technological independence in several areas, including super turbines. And at the same time, there is a huge — almost US$24 billion — (RM98.4 billion) — national programme to renew Russian power stations before 2030. So Siemens, quite logically, had decided to become a part of the Russian national economic scene before American (surprise!) corporation General Electric Co could compete with it.

And that’s not an isolated case. Overall German investments into Russia have risen to €3.2 billion (RM14.72 billion) in 2018, 14% more than in 2017. This year’s investments (in six months) are already €1.76 billion and rising.

All that was achieved in spite of a huge package of European Union sanctions against Russia and the indomitable American pressure on Europe to squeeze Russia.

Let’s have a closer look at the whole idea of sanctions. This is how you do it: You get yourself a case of moral and political outrage about a country, and you — among other things — declare that you do not trade with such an awful nation. To make it effective, your friends also do not trade with the nation either. You strangle it economically, you whip up that moral indignation and work to “change that nation’s behaviour” together, preferably with the change of its leaders.

Why, then, doesn’t it work? First, because the pretext of economic pressure is somehow always artificial, or had been cooked up in the crudest possible way. Second, sanctions look too much like a crooked attempt to eliminate competition and businesses do not like it.

Cheaters often fail because they overdo it. You might have tried to blame Russia in one, two or three cases, and hope that the brainwashed public might have accepted it. But very soon, as the local joke goes, if there is anything bad happening in the world, you blame Russia, and you never miss.

The third reason is that there is an obvious oversupply of sanctions in the world. You may think that Russia was a special case in 2014. But now, we have exactly the same stale tactics used against China. Spying technologies, concentration camps in Xinjiang, unbearable social oppression…isn’t it a bit too far-fetched?

And then there is also Iran that also is being accused of anything imaginable. In each case — just like with Russia and China — you see that somebody is trying too hard to be credible, not to mention the fact that it’s the same “somebodies” pressing on with their tiresome brainwashing.

The result is predictable. Very soon when anyone (East or West) tries to say that this or that nation is bad, you cannot do any business with that nation. The standard answer will be a disinterested “oh, you are at it again”. And nothing much else.

Dmitry Kosyrev is an author of 8 novels and a book of short stories as well as a columnist for 2 Moscow publications. Orientalist by education (Moscow University), he has a special love for Malaysia.