There’s no way Vladimir Putin can freeze Europe, and no way the US can freeze Putin.
There is no accounting for the final destination of an asset. It’s a statement of obviousness that sadly remains elusive inside a commentary that haughtily thinks it’s all obvious.
The last proof of reason beyond deep reflection concerns Vladimir Putin, President of Russia. His gathering of 100,000 Russian troops on the Ukrainian border is causing much discussion about what needs to be done, what could be done, and what Putin could potentially do in response to what theoretically could or should be done.
Supposedly, one way for the free world to stop Putin from taking over Ukraine would be for the United States and other economically important nations to cut Russia off “from the global banking system.” It all seems so simple. Take away Russia’s access to hard currency only for Putin to slowly order Russian troops to withdraw from the country’s long border with Ukraine.
Except there is no reasonable way for the United States or anyone else to cut Russia off from global finance. This is because the US dollar and other credible global currencies are giving new meaning to fungible, much like finance itself.
Looking at all of this in terms of a relatively sanctions-free present, Russia doesn’t have access to the “global banking system” or “dollars” because the United States decrees it as much as Russia has access. to global finance and dollars simply because its economy is strong enough that funding sources actively seek to liquefy the economic activity taking place in Russia. Assuming that the United States could have frozen Russia’s access to American sources of financing, or American sources of “dollars”, one cannot forget that more than half of all American dollars in circulation today today do so outside of the United States. The money goes where it is treated well, and if it is considered safe inside Russia, it will flow there regardless of the wishes of the American political and foreign classes.
To use just one example, it is not unreasonable to assume that President Biden could demand that JP Morgan, Goldman Sachs
All of the above ignores how competitive the field of finance is. Market shares are hard won. Please stop and think about the previous truth. Assuming the Morgans and Goldmans stop funding economic activity in Russia, can a reader reasonably assume that all sorts of other global sources of funding won’t be lining up to do in Russia what GS et al used to do ? The question answers itself. In the “closed economy” that is the global economy, there is no way to stop financial flows. Those who lose business will be replaced, not to mention that those who freeze certain customers cannot control what their counterparts do to those same customers.
The only real obstacle to money-type financial inflows is the lack of production. Without this, finance always and everywhere finds a productive economic activity.
Which brings us back to Putin. An often bruised obstacle to what insults the “sanction” (cutting off access to banking services) is the vast amount of natural gas reserves inside Russia. The thinking of political and foreign policy elites seems to be that a potential response to the banking sanctions imposed on Putin’s Russia would be for Putin to respond by “cutting off gas supplies to the European Union in the middle of winter” since these countries obtain more than 40 percent of their gas from Russia.
The problems with the above assumption are many. On the one hand, market share is once again hard won. Since that’s the case, it’s hard to believe the Russians would so happily give up such a valuable market. More importantly, the Russians are unlikely could giving up access to such a valuable market. The reason they couldn’t is simple: they need the money.
To which some will say the Russians might just stop selling to EU countries. Well, see above. Then just use your common sense. Assuming a highly unlikely scenario in which Russian producers give up a lucrative business only to sell the gas to “others”, there is again no consideration of the ultimate destination of anything. Just as the “US” continued to import “Arab” and “OPEC” oil amid the 1973 embargo, EU countries would continue to import Russian gas. Embargoes are symbolic.
In reality, all economic sanctions intended to solve foreign policy problems are symbolic. They are given the fundamental truth that as producers, we all ultimately trade and invest with everyone, whether we like it or not. In other words, there is no way to cut off banking access to Russia, nor is there any way for Russia to cut off access to its natural gas.
What does all this mean for Ukraine? There is no answer here since there is no presumption of expertise in foreign policy. What is responsible is that the efforts of foreign pundits, politicians and politicians to play the economy by limiting Vladimir Putin‘s ambitions will amount to far less than nothing.