Russia and Economic Blackmail

The New York Times ran an article today on the way the European Union is attempting to crack down on the way the Russian Federation has used its dominant position in supplying natural gas to Eastern Europe to assert dominance over the former Soviet bloc.   Anytime these countries attempted to assert a degree of independence Russia would kill the flow of gas. In the middle of winter. In Ukraine. The result was that Russia was able to negotiate contracts with Eastern Europe and the EU where higher than market rates were paid for an essential commodity, while at the same time asserting its dominance over neighboring countries. All without moving a single soldier.

This is a superb example of the way that economic power can be used to coerce a state  in ways that military power never could. Oftentimes, when we think of economic power, we think of sanctions or embargoes to the exclusion of everything else. Oftentimes the possession of a commodity, and a willingness to restrict the supply of it, can be a far more potent source of power over other states. This is in some ways self evident. Saudi Arabia, Iran, Venezuela; these countries would be largely irrelevant if it were not for the presence of large oil reserves within their borders. As America is most often a buyer of such things, we tend to discount the power that possession of such reserves brings until they are no longer available. Witness the shock that was brought on by the ’73 OPEC embargo, or the dismissive attitude towards Venezuela that is prevalent despite their having the largest proven reserves of oil on the planet. This is an area of economic power that is largely denied to the United States.

This is relevant because the problem is only going to expand. Not in energy, however. It looks as if America will be able, through a combination of new technologies and newly discovered deposits, be able to provide for the majority of its energy needs. The real threat comes from the elements used in the next generation of computers and electronics. Rare earth minerals, essential for the production of high technology devices, are found almost exclusively in China. The majority of the globe’s lithium, needed for the production of next generation batteries, is possessed by Bolivia. Other, more exotic, metals and minerals that are the key ingredients in new technology are not found in the United States.  This obviously places the United States at a disadvantage and, most worryingly, there is little that can be done about it.

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One Response to Russia and Economic Blackmail

  1. csmeeth says:

    Building off of what you said here, I know that Ukraine actually signed an agreement with Russia to use their port of Sevastopol for the Black Sea Fleet, in return for extending the lease of gas. This just highlights how Russia can yet again use their impressive gas reserves to bully and/or coerce other countries to adopt policies conducive to their national interests. However, a result of this has led to eastern European countries to further distance themselves from dependence on Russia, which in turn has led to its own set of problems.

    As Patrick said, this is just one of many problems with certain areas/countries having a massive comparative advantage with certain resources. As has been mentioned, these few countries could potentially exploit their access to their resources, which would consequently jack up the prices world wide. Thus, a dependency of sorts would emerge, leading to heightened competition and higher political leverage.

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