“If fully unleashed, sanctions are also weapons of mass destruction. They must not knock down buildings or collapse bridges, but they destroy businesses, financial institutions, livelihoods and even lives,” Rajan said in an essay.
Former Reserve Bank of India Raghuram Rajan said economic sanctions imposed on Russia, such as excluding several Russian banks from the SWIFT messaging system, are tantamount to economic weapons of mass destruction. While Russia’s unprovoked attack on Ukraine undoubtedly had to be countered, these economic weapons pose risks that should not be underestimated, Rajan said in an essay.
“If fully unleashed, sanctions are also weapons of mass destruction. They may not topple buildings or collapse bridges, but they destroy businesses, financial institutions, livelihoods and even lives. Like military weapons of mass destruction (weapons of mass destruction), they indiscriminately inflict pain and affect both the guilty and the innocent. And if used too widely, they can reverse the process of globalization that has allowed the modern world to thrive,” Rajan said in an essay published last week.
Earlier this month, the Russian ruble plunged nearly 50% of its value against the dollar after several governments imposed sweeping sanctions on Moscow. More than 400 multinational companies have announced their withdrawal from Russia so far, according to the Yale School of Management. The list ranges from oil giant BP Plc to financial firm BlackRock, from retailer Adidas to fast food chain McDonalds.
Rajan, who currently teaches finance at the Booth School of Business at the University of Chicago, said the global political order has been disrupted by the war, adding that the Russian military attack on Ukraine could expand even after the sanctions. But “if Russian President Vladimir Putin’s aggression went unpunished, more international provocations like his war in Ukraine would become inevitable,” he said. However, he added that unlike military strikes, where the damage is seen to be more visible and upfront, economic sanctions will reduce economic growth in Russia, lead to unemployment and even lead to deaths.
However, Rajan said, if not properly managed, these sanctions could lead to overuse, eventually causing ripples in global financial orders and undoing all the progress made by globalization. He said companies could be pressured to stop doing business in certain countries, central banks could avoid holding foreign exchange reserves or countries could explore alternatives to the globally accepted SWIFT financial messaging network.
Advanced economies should recognize that a balkanized global economy would hurt everyone, Rajan said. “In addition, holding talks on “economic arms control” could be a first step towards restoring the broken world order. Peaceful coexistence is always better than war, however it is waged,” he added.
This post Sanctions against Russia resemble ‘economic weapons of mass destruction’, says Raghuram Rajan was original published at “https://www.financialexpress.com/economy/sanctions-on-russia-akin-to-economic-weapons-of-mass-destruction-says-raghuram-rajan/2466714/”