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A new economic order of things

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Russia's intervention in Ukraine and the economic sanctions imposed on it are leading to a reorganization of the world economy. A common feature of both political and economic analysis is that Europe is the loser in the changes that are taking place.

Following the intervention in Crimea and the imposition of sanctions on Russia, the country proceeded with two substantial economic moves. It strengthened the domestic economy by replacing many of its own imports with substitutes for its own production and strengthened economic ties with eastern countries such as China.

An economy that is growing much faster than Russia and is claiming leadership on the world map challenging the very primacy of the dollar in world trade.

Russia is one of the strongest players in the energy sector and in the export of metals necessary for heavy industry, and the current situation with sanctions will significantly affect the countries that are directly economically connected to it. If one analyzes the sanctions imposed there is a lot of attention to the energy sector.


Statements by officials that they will stop, especially European countries, that they will become energy independent from Russia sound good, but gas desalination plants and pipelines are not being built overnight. As long as estimates for an extended period of conflict are confirmed, energy costs will remain high, creating chain problems in businesses and households.

The release of strategic oil reserves by some countries is not a solution either. It is a temporary measure to boost supply and possibly curb oil prices, but it can be implemented for a short time. There is also the question of whether the OPEC countries are willing to go beyond what has been agreed (they know that if they do, there is no going back and lonely marches can only cause harm). This is becoming more pronounced at a time when the world is systematically investing in a better environment and renewable energy infrastructure.

After the collapse of the Soviet Union there was a great tendency for capital, human resources and talent to flee from all the countries that made up the union (eg many people working in international software companies come from Ukraine). Through this mass exodus, companies were established abroad, mainly in countries where there was a favorable tax regime, with the country's resources being scattered in various jurisdictions.

Recalls the incentives for zero taxation given by the Russian government to de-offshore companies and the renegotiation of all “attractive” double taxation agreements so that dividends receivable are taxed at 15%, while in Russia are taxed at 13%.

The above policies in combination with the measures implemented internationally to require a real basis in the countries where a company is taxed have led to a more rational approach.

It would be enlightening if a study was done to show in which countries the investments of Russian capital were made in the real estate sector but also in other sectors. Now with the restrictions, the owners may think about selling them.

Certainly the use of force is condemned wherever it comes from as well as any actions that violate human rights. If we analyze the course of events, the current situation is only the result of political frictions or there were issues of sovereignty over economic issues.


The sanctions imposed cause suffocation in Russia and its people, but at the same time they create significant problems in the countries that impose them, some more and some less. Apart from the inflation that is expected to increase and will affect the society horizontally as a whole, there are also issues in other sectors such as tourism, financial services, retail (if a large part of the consumer-tourist is excluded), but also the heavy industry.

Source: politis.com.cy

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