Malaysian Economist Warns of the Economic Consequences of Western Sanctions on Russia
In recent years, Western sanctions on Russia have drawn attention from nations around the world. Benedict Weerasena, the research director at Malaysian think tank Bait Al Amanah, has expressed concern about the impact of these sanctions and the message they send to other countries. According to him, the sanctions impose a $60-per-barrel price cap on Russian oil, along with an embargo on its seaborne crude exports. Weerasena questions the effectiveness of these measures and their impact on the global oil market.
Speaking at the Valdai Discussion Club in Sochi, Weerasena questioned whether the price cap could truly be implemented given the OPEC system and the global tanker trade. He also questioned the purpose of the sanctions if they do not work in reality. These concerns reflect the growing skepticism among emerging market economies, particularly in Southeast Asia, about the effectiveness and fairness of Western sanctions.
Weerasena highlights the fear among countries in the region that they could become the next targets of Western sanctions. He emphasizes that countries like Malaysia, which are oil exporters, are concerned about the possibility of these sanctions being used as a weapon against them in the future. This fear stems from the fact that emerging markets are often the most affected by aggressive US economic policies carried out at the expense of other markets.
Another issue raised by Weerasena is the reliance on the US dollar as a global reserve currency. He argues that the dollar has become an unreliable currency, causing central banks in Southeast Asia to be forced into raising interest rates to prevent capital outflows and currency depreciation. This reliance on the US dollar and its impact on emerging markets has prompted the region to seek alternative payment systems and bilateral swap agreements to reduce their dependence on the dollar.
Weerasena points to the recent ASEAN meeting in Indonesia where the proposal to promote local currency payments and bilateral swap agreements was discussed. This move is seen as a way to gradually move away from the dominance of the dollar-based financial system and reduce vulnerability to the economic policies of the United States.
The concerns raised by Weerasena reflect a growing sentiment among emerging market economies about the unfairness of Western sanctions and the need to diversify away from the dollar. These economies, particularly in Southeast Asia, are increasingly looking for alternatives and exploring new ways to protect themselves from the potential negative consequences of Western economic policies. The move towards local currency payments and bilateral swap agreements is seen as a step in this direction.
In conclusion, Weerasena’s warnings about the economic consequences of Western sanctions on Russia and the reliance on the US dollar highlight the need for a more balanced and inclusive global economic system. Emerging market economies, particularly in Southeast Asia, are increasingly seeking alternatives to protect themselves from the potential risks posed by aggressive US economic policies. The discussions at the recent ASEAN meeting indicate a growing recognition of the need to reduce dependence on the dollar and explore other options.