🧐 Can Corporates Put An End to War?
Russia has so far not responded to economic sanctions. But will a mass exit of businesses change things? (Reading Time: 3 mins)
As if Covid wasn’t enough, the threat of a third World War is threatening our desires for a ‘normal’ life.
The Russian invasion of Ukraine is still underway and a major city, Kherson, has fallen into Russian hands (If you want to know the backstory of the war, here's our detailed explanation).
Will history repeat itself? Or will this time be any different?
Let's take a look.
Impact of Sanctions
Gone are the days when wars were fiercely fought on the battlegrounds. The modern-day wars are fought with business prowess.
The sanctions against Russia are some of the most severe issues in recent times.
G7 countries (Germany, the UK, the US, Japan, South Africa, Canada, France, Italy) have all frozen Russia's central bank assets in their country.
Russia won't be able to use a large part of the $630 billion in foreign exchange reserves that it has.
Most countries have pulled out all the money they had invested in Russia. This has caused the Russian ruble to fall 30%. It is now equal to one cent or Rs. 0.69.
These reserves were the only way for Russia to pay for imports (ones that are still allowed).
Plus, the sanctions have also blocked some Russian banks from the SWIFT payment system. What’s that?
This system is like a group chat for the countries of the world. You need it to talk about cross-border trade payment.
If you're not on the group chat, you're not accessible. So, a lot of countries won't want to take the headache of texting you personally to coordinate payments.
But is this really effective?
Well, when Iran was banned from this system in 2012, it lost 30% of foreign trade.
And that's not all, several countries have blocked Russian billionaires' personal assets held in their banks. This includes Putin's wealth.
The impact of all this?
Russian citizens are seeing an increase in inflation.
They are running to banks to take out all of their money.
Most of their savings have eroded because the Russian stock market has plunged so much that they have just decided to shut it down instead of reporting record losses every day.
But why isn't Russia blinking yet?
Well, because it still has the support of its number one export partner: China.
And more than half of its reserves have been converted into gold and Chinese yuan. So, they're still safe.
Plus, it knows that each of the sanctions that the world powers have issued are going to impact them as well.
And these sanctions have so far not stopped the export of oil and gas (as this would cripple other countries as well), which is the lifeblood of the Russian economy.
Sounds like a plan. And it could be a pretty good one. But then something unexpected happened.
The New Ace: Tech Giants
So far, in world history, businesses and corporations have only had a supporting role to play in the wars: silently ramping up production.
This is exactly the role Henry Ford's assembly line played in WWI.
But now businesses are taking a bigger lead. And this could be a fatal blow to Russia.
Several major companies like Apple and Nike have decided to no longer sell their products in Russia.
Major oil corporations like Shell and BP are also pulling out.
Lead shipping suppliers have also refused to supply shipping containers to the country.
Boeing, Airbus, Volvo, Daimler Truck, Visa, MasterCard are all companies cutting ties with Russia.
Google and Meta have also decided to not pay Russian state media for running any ads or making any money from their platforms.
This could completely cripple several Russian industries and bring them to a complete standstill.
Meanwhile, many companies have shown overwhelming support for Ukraine.
For instance, Elon Musk's Starlink is providing internet in the country after Russia shut it down.
The power dynamics of the world is shifting from brawn to brains, from arm-race to tech-superiority. The way wars have been historically fought, has been changed forever.
So, now the question is will this corporate exodus move Russia to end the war?
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