The developing world should unite amid crushing Western sanctions
Huang Yongfu
The Russian Ministry of Foreign Affairs building in central Moscow, Russia, February 3, 2022. /VCG

The Russian Ministry of Foreign Affairs building in central Moscow, Russia, February 3, 2022. /VCG

Editor's note: Huang Yongfu is an economic affairs commentator. After earning a PhD, he started his career at the University of Cambridge and then moved on to the UN system. He is the author of many papers and books related to economics. His current interests lie in global development and Sino-U.S. links, especially trade, financial and technological issues. The article reflects the author's opinions and not necessarily the views of CGTN.

On March 11, the Group of Seven countries issued a joint statement that suggested they would strip Russia of most favored nation (MFN) trade status and revoke important benefits of Russia's World Trade Organization (WTO) membership. MFN treatment is a key principle of the WTO as a non-discrimination guarantee for its 164 members, reinforcing the value of equal tariff and regulatory treatment for other members. No precedent exists in WTO history to kick out members.

Since Russia launched its special military operation in Ukraine, the Joe Biden administration has allied the West to proclaim trade, financial and technological sanctions against Russia, with the goal of turning Russia into "a global, economic, and financial pariah," according to a senior White House official.

Downgrading trade ties with Moscow has been in the process, especially export controls and a trade embargo on Russian oil and natural gas. Export controls apply to goods both made in America and outside America but containing American technology, ranging from cutting-edge machinery to microchips that could be used for Russian military and high-tech sectors. An embargo on Russian oil and natural gas was immediately added to supply shock and led to rising oil prices and inflation in Europe and the U.S.

Prices are displayed on a sign at a gas station, with the U.S. flag in the background, in Milwaukee, Wisconsin, U.S., March 14, 2022. /VCG

Prices are displayed on a sign at a gas station, with the U.S. flag in the background, in Milwaukee, Wisconsin, U.S., March 14, 2022. /VCG

Acting in concert with Europe, America has banned a range of parties from transactions with big Russian commercial banks and its central bank, and frozen most of the bank's assets outside Russia, aiming to kick it out of the financial system. The West is also geared toward curbing Russian access to funding from international financial organizations such as the International Monetary Fund (IMF) and the World Bank.

The American-backed anti-Russian economic campaigning to expel Russia from the global economy so abruptly has hit the Russian economy so hard to the extent no major economy in modern history has ever experienced. It could cause far-reaching disruption to the West, weaken international institutions, lead to a dangerous subdividing of the world economy into competing blocs and other unforeseen dynamics. It signals the global trading system with the WTO at its core is going further apart, and the era of free and unfettered trade with rivals is passing. It marks a future in which nations and companies trade in more isolated trade blocs.

Prominent among the current targets is Russia against the West's long history of sanctions on numerous countries around the world.

After World War II, the American-led West play a major role in setting up the post-war rules-based global trade and financial systems that boost the integration of the global economy. With economies intertwined, the West from time to time has slapped unilateral sanctions on nations and individuals not amiable to them, using the pretexts such as so-called human-rights abuses, genocide, tech-spying, by denying supply of crucial raw materials, refusing purchases of their goods or the like.

Depending on who is on the receiving end, the West has selective amnesia and double standards when it comes to applying sanctions. According to The Economist, since 2000, the number of individuals and entities on America's sanctions list has risen more than tenfold to 10,000, and by the 2010s, a third of the world's population lived under Western sanctions.

In history, however, few successes have been achieved by America's sanctions, which worked only when they prevented Anglo-French invasion into Egypt during the Suez crisis in 1956 by threatening to dump sterling bonds and block Britain's access to IMF credit, and in persuading Muammar Qaddafi to end his weapons of mass destruction program and stop funding terrorism by a mix of sanctions in the 1990s and early 2000s.

Most sanctions hardly achieved their expected objectives. As the U.S. Department of State said in a report, it imposed the "maximum pressure" sanctions against Iran in 2015 and later, which, however, haven't dislodged the mullahs who run the country. American-led embargoes and sanctions on its ideological enemies, for years in the case of Venezuela, and for decades when it comes to Cuba, have failed to change governments in those countries and force them to bow down. Before World War II, sanctions did not stop Germany from choosing war.

Most sanctions often have unintended consequences, such as serious damage to the economy as a whole, which can push more countries toward autarky. The more economic weapons have been wielded, the more countries will seek to wean themselves off the American-dominated system, triggering a broad shift toward autarky. To reduce dependence on the Western system, Japan in the 1930s sought to develop a "yen bloc," an economic zone including South Korea and China's Taiwan region. Germany also constructed massive capacity for the synthetic production of oil for "raw-materials freedom" in the mid-1930s.

Some sanctions even fueled a fire or war. The sanctions used between two World Wars ended up undermining the already precarious political foundations of international trade during that time, contributed to fracturing, and in turn set the stage for World War II. It has been argued that Japan's attack on Pearl Harbor in 1941 was triggered by a U.S. oil embargo that caused huge economic loss of foreign oil supplies and trade revenues.

Unfortunately, the American-led West holds the ultimate power to slap unilateral sanctions to decide the fate of not just people, but also nations, without regard to international rules or consulting the international community through the United Nations.

The harsh reality has sobering implications for developing countries vulnerable to sanctions. In order to secure strategic independence, developing countries should urgently coalesce around and collaborate with emerging countries such as China to develop alternative financial and technological infrastructures that make them sanctions-proof.

The global community should also have thought of creating new payments networks that bypass the Western banking system in the interests of all.

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