Isolating Russia from technology – how effective is the West’s strategic embargo?
ÁDÁM MÁRKUS – DÓRA MEZŐ – VERONIKA FENYVES – LÁSZLÓ ERDEY
Although Russia has been able to circumvent Western strategic embargoes, this study shows that this does not indicate the failure of sanctions. Sanctions are mechanisms that impose significant economic costs on those affected and provide other actors with previously unavailable benefits.
The study provides a detailed analysis of the impact of the strategic embargo imposed on Russia on dual-use products classified as “high priority” by the European Union and its allies. Drawing on the most detailed and up-to-date data available and taking a broader view, the paper confirms that Russia’s isolation has been relatively unsuccessful in the short term in the product group in question. In a disrupted system of geopolitical relations, the sanctions have reinforced some shifts that had already begun and, in some cases, have had unexpected consequences. The use of intermediary countries in foreign trade has led to significant price increases and deterioration in the quality of critical goods for Russia. The effectiveness of sanctions should not be assessed based on the otherwise unattainable requirements of a total blockade, but rather
on their ability to cause lasting economic and strategic tensions in the target country. This is one of the most important conclusions of this paper.
Journal of Economic Literature (JEL) codes: F13, F14, F51, F52.
Keywords: dual-use products, strategic embargo, sanctions, Russian-Ukrainian war, trade diversion.
The Fragile State of Russian Rail Logistics: The Impact of Labor Shortages, Sanctions, and Financial Constraints on Freight Transport Performance
PÉTER BUCSKY
In the war launched by Russia against Ukraine in 2022, as in any other armed conflict, logistics play a key role. The freight transport systems in the former Soviet region are primarily based on railways, which is why the warring parties must provide the logistics needed to wage war and maintain the economy. While no significant difficulties are foreseen in the former, the latter are increasingly problematic due to the difficult-to-manage interdependent effects of technical, sanction, trade and labour market challenges. Sanctions have also made the supply of rail equipment and parts impossible in its previous form, and Chinese imports have not entirely replaced previous Western technology and partners. A perfect example of this is the case of high-quality bearings, which play a key role in rail freight transport. The sanctions have not only changed the supply of equipment to Russian railways but also the structure of the relationship. Transit traffic between China and Europe, built up over the last decade, has started to decline, causing a significant loss of revenue for Russian railways, which are already facing an increasingly complex financial situation. Overall, the mutually reinforcing effects result in slower, more expensive, and less predictable rail transport, which limits the development potential of the Russian economy.
Journal of Economic Literature (JEL) codes: R6, L92, F51.
Keywords: rail freight, sanctions, international trade.
The political and economic aspects and scenarios of differentiated European defence
BOGLÁRKA KOLLER – ANDREA ÉLTETŐ
The article discusses the current challenges facing European defence policy, focusing on the possibilities for implementing a common defence strategy. There have been notable initiatives for unified defence since the beginning of Western European integration, but these have been mainly unsuccessful due to political, ideological, and sovereignty-related reasons. However, Russia’s annexation of Crimea in 2014 and its aggression against Ukraine in February 2022 have made it urgent to rethink a unified European defence strategy. The re-election of Donald Trump and the radical transformation of transatlantic relations have made it urgent to strengthen the European Union’s independent defence capabilities. Based on the concept of differentiated integration, the article examines a flexible approach to defence policy that allows for varying levels of commitment and cooperation between EU member states and third countries. The article also presents the defence policy, as well as its fiscal, industrial, and innovative aspects, emphasising the interrelationships between the three pillars. The article argues that the creation of a differentiated and integrated European defence policy is essential for strengthening the security and competitiveness of the European Union, this being the only way to preserve the
achievements of integration in a changing global foreign policy and foreign economic environment.
Journal of Economic Literature (JEL) codes: H5, F5, O52.
Keywords: European Union, defence policy, European integration, Common Security and Defence Policy, competitiveness, defence industry, differentiated integration.
Trump 2.0: a new trade war – the end of a world order
GYÖRGY CSÁKI
As the 47th President of the USA, Donald Trump continues what he began as the 45th President, weakening multilateral international organisations and developing protectionism to an unprecedented level in almost a century. However, this time (relying on his much stronger political legitimacy), he does everything faster, more aggressively and at a higher speed. By introducing general customs tariff rates, with supplementary tariff rates varying from country to country, in the first six months of his presidency, he overturned the rules-based international economic order that was based upon the principle of non-discrimination. He has replaced a trade policy rooted in reciprocal trade agreements and seeking mutual benefits with a power-based trade policy as the cornerstone of US foreign economic policy. His repeated verbal attacks on the Fed and its chairman and the narrowing of the institution’s decision-making competencies have weakened the dollar, which, together with unpredictable economic policy measures, reduces trust in the US and the dollar, and thus endangers the stability of the international monetary and financial system, recalling the risk of a rebirth of the “non-system” between the two world wars.
Journal of Economic Literature (JEL) code E42, F13, F52.
Keywords: world economic order, international trade, tariffs.
Thoughts and comments on Paul Blustein: King Dollar. Yale University Press: New Haven and Kenneth Rogoff: Our Dollar, Your Problem. Yale University Press: New Haven
ATTILA KÁROLY SOÓS
Two books on the US dollar written by a journalist–economist and a university economics professor–US and IMF civil servant yield important basic information, case studies, and analyses to readers for a thorough consideration of the past, present and possible future of this currency used in the United States but also globally. The approaches and methods of the two authors complement each other. Both books discuss the advantages and disadvantages stemming from the dollar’s dominant international role for the US and the rest of the world. Albeit none of the two authors can predict whether the dollar will be able to preserve its role of dominant currency of the world in the coming years and decades, we receive from them an abundant basis, a plethora of arguments pro and con for considering that question. The books also treat other issues related to the US dollar, which are not discussed this article.
Journal of Economic Literature (JEL) codes: E4, E5, E62, F33, F4, F52.
Keywords: United States, dollar, central bank, monetary policy, international finance, national security