Opinion – Vinicius Torres Freire: Putin’s War on the Borders and Brazil’s Economy

The retaliations of the “West” against Russia disclosed so far should not disturb Vladimir Putin’s sleep, who may not even sleep. Maybe it’s a Highlander Vampire powered by energetic poisons from the dead, but living, KGB.

Besides the joke, so what? If Putin can withstand sanctions, he can eat Ukraine around the edges for a long time to come and thus keep the salseiro in the politics and finance of the “West”.

If nothing else, this interests us, inhabitants of the far west, the periphery of the world, of Brazil. To a continuous and almost general surprise, the real and the stock exchange continue to appreciate, rising from the deep holes where the epidemic, debt and Jair Bolsonaro had thrown the prices of the country’s financial assets.

How long does this love of money for the financial xepas of Brazil last? How long can it last with a crisis simmering low and for considerable time in Ukraine? How long can it last, given that we will have high interest rates in the US starting next month and a more serious election campaign starting in April?

The threat of war did not itch in Brazil’s relative and recent financial calm, it is good to remember. But it is important not to neglect the role in poor Ukraine.

Joe Biden said he “cut off” Russia’s funding in the United States. Not quite. American financial institutions have not been able to buy new Russian government debt for some time; now, they will not be able to trade debt securities on the secondary market. There is no sanction in sight for private companies (apart from those that trick Putin, finance war, assassination, poisoning, etc.).

Only one-sixth of Russia’s external debt is owed to the government (equivalent to 5% of GDP, US$80 billion); otherwise, it’s private. Companies have had and will have more difficulty in financing and refinancing, of course.

Lack of access to new external credit can be a problem in the medium term (such as a devaluation of the ruble, among others). But Russia has an external surplus (more than 2% of GDP) and US$ 600 billion in reserves. Hold the stride; Putin, an autocrat, can take it even longer, unless the Russian elite (military, oligarchs) have the power to kick him out, which the “West” seems to have no idea about.

If Putin can afford to almost annex a piece of Ukraine (part of the breakaway republics of Donetsk and Lugansk), perhaps he’ll try to see how much another piece of reckless audacity costs. And the crisis drags on: more expensive oil, maybe wheat, corn, soybeans and cooking oil too, more inflation. Russia and Ukraine have weight in the world markets for grains and some metals too, not to mention energy, of course.

The American financial market is already ill. Inflation, expensive gasoline, fiasco in Afghanistan and Putin’s smackdowns toppled and toppled Joe Biden’s prestige, for the rest. What are you going to do more drastic?

Sanctions that threaten the supply of gas and oil to the European Union could divide Europeans, as the dependence on Russian energy and the financial capacity to withstand hardships is varied. There is therefore at least a risk that there will be different opinions on what to do with the Russians.

If he doesn’t get involved in a large-scale open conflict, at enormous risk and cost, Putin can carry on the war of friction. It is not a prediction, it is a hypothesis, a situation that could cause more significant damage to the world economy.

With no strategy and no instruments or weapons to dissuade Russia without causing general damage, even for itself, the “West” may have to bully Putin for a long time, with predictable damage. That bill would also arrive on our doorstep.