Last Friday, while media reported that Russian Federation forces were advancing towards Kyiv, the European Union (EU) and the United States imposed sanctions on Russian President Vladimir Putin and his Foreign Minister, Sergei Lavrov, for the invasion of Ukraine.

These sanctions, which include freezing assets Putin and Lavrov may have in Europe and the United States, were the latest move in a list of restrictions imposed by the European Union, the United States, Canada, and Japan.

Josep Borrell, High Representative of the EU for Foreign Affairs and Security Policy and Vice-President of the European Commission, announced a package of sanctions which include the members of the Russian National Security Council, the members of the Duma (the Russian House) who supported Putin’s decision; it will not grant visas to the Russian government officials and will also sanction Belarus and its officials, the Russian-allied republic that facilitated the Russian military assault on Ukraine. The West seeks to weaken the Russian economy and thereby slow down the military escalation in Ukraine and potentially an advance to the member countries of the North Atlantic Treaty Organization (NATO).

However, according to two experts interviewed by El Nuevo Día, the effectiveness of economic sanctions against Russia remains to be seen or will take some time. The administration of U.S. President Joe Biden indicated that some of the sanctions could have concrete effects within a month. This is a time that Ukraine does not have, and a possible diplomatic way out cannot take that long either.

However, the day after the Russian invasion, specialized media outlets such as Bloomberg and Forbes reported the multi-million dollar losses that Russian billionaires were facing, due to the markets’ fall and the sanctions. Last Friday, Forbes reported that twenty of these Russian billionaires had seen their wealth reduced by some $90 billion.

Above all, the interview with economists José Rivera Rivera and Roberto Orro shows that beyond the direct result of the conflict, (the second when considering the unilateral annexation of Crimea in 2014), Russia’s invasion of Ukraine begins to shape a new world order. It is a stage in which the web of global institutions and organizations that emerged after World War II and the so-called Cold War, such as the NATO, the European Commission, or financing organizations like the International Monetary Fund (IMF) are being strongly questioned. And it is also a situation in which economies like China could decide their future; economies like Puerto Rico find themselves at the mercy of external events and economies like the Russian may take certain risks because they previously strengthened their internal structures or have small debt loads in the international market.

“We (in Puerto Rico) are constantly at the mercy of different international events and here we see it again,” Rivera Rivera said.

According to Rivera Rivera, president of the Association of Economists of Puerto Rico (AEPR, Spanish acronym), households and businesses on the island will have to prepare for further increases in gasoline, electricity, and other goods because of the armed conflict.

And this comes on top of price increases in most goods, services and raw materials that consumers and businesses on the island have seen last year.

Last Tuesday, as soon as it became known that the Russian Parliament recognized the Ukrainian provinces of Luhansk and Donetsk as “People’s Republics,” oil and natural gas prices reached levels unheard of since 2014.

Compared to January, crude oil - which slightly surpassed the $100 a barrel mark during the first day of the conflict - has risen by 22 percent, according to data from the Energy Information Administration.

For Rivera Rivera, if the rapid evolution of the conflict in Ukraine may have been unlikely, it should be even more unlikely that after what has happened in Puerto Rico over the past few years, the urgent need to adopt different policies to deal with events, in this case, the effect of a military conflict in the energy market, has not been understood.

“We are talking about this (the Russia-Ukraine conflict) because we are still dependent on oil and natural gas. We will potentially have to resort (the United States) to ‘fracking’ and natural gas, but we know that it damages the environment... the more we can manage with what we have, within our possibilities, the less we’ll be affected by outside factors that create so much volatility in any economic area.”

For Rivera Rivera, in general terms, the effects of an armed conflict can be diverse, ranging from interruptions in the supply chain or an increase in the financing costs of a company or individual. This, he stressed, does not mean we have to despair, but rather take measures to keep the budget in check, save as many resources as possible, and, in the investment world, make decisions aimed at preserving capital or taking advantage of the circumstances.

On this occasion, Rivera Rivera added, although in Puerto Rico an improvement is anticipated due to federal reconstruction funds, the course of economic activity -both locally and internationally- will be defined by what may happen on the other side of the Atlantic and by U.S. monetary policy, which still “has not responded emphatically to the inflationary situation”.

So far, the World Bank anticipated that the global gross product would grow 4.9 percent this year, consolidating the recovery after the Covid-19 pandemic. In Puerto Rico, the Oversight Board anticipates that the local economy, measured by Gross National Product (GNP), will grow 2.6 percent during the current fiscal year.

Both projections now depend on what will happen with global supply chains, and this will be influenced by the stance adopted by China.

Currently, Xi Jinping’s government has been cautious in its support of Russia. According to U.S. and European media, the leader of the world’s second-largest economy urged Putin to talk to Ukraine.

But less than a month ago, just before the Winter Olympics in Beijing, in a joint statement, Jinping and Putin criticized the advance of Western influence and NATO and announced the strengthening of their relations. The understanding between China and Russia - the world’s second-largest oil exporter and a key supplier of natural gas to Europe - includes the construction of a new gas pipeline and increasing Russian exports by 40 percent. That move would offset an embargo from Europe or the United States.

“This is an opportunity for China to prove itself as a world power and show that it can undermine the United States and Europe and I think it will take it,” said Rivera Rivera.

For Orro, if Europe and the United States have preferred economic sanctions to weapons, and Russia has played its cards to fight what Putin describes as “the anti-Russia project” from the West, it is because “nobody wants, at this point, to complicate their lives.”

“At this point, the effect of sanctions will depend on how long the conflict lasts,” Orro said.

“If that conflict is prolonged, then it would have other repercussions, it is another disruption in the supply chains and it would also create security risks in the Mediterranean,” he added.

According to Orro, who is very familiar with international political and economic dynamics, as well as the Cuban economy, the Russian economy, and those of the group of republics that emerged after the fall of the Union of Soviet Socialist Republics (USSR), the economic sanctions imposed from the West denote -partly- a lack of understanding of the political, historical, cultural and economic reality of Russia and also of Ukraine.

“It (Russia) is not a very big economy, but it is a very resourceful country that produces everything,” Orro said. He explained that when he was living in Cuba, that country used countless products and equipment imported from Russia. “It (Russia) is an economy with a culture, with a history of seeking self-sufficiency.”

“(Russia) is a country that was forged precisely in isolation and that took advantage of the second industrial revolution,” the economist added, stressing that the Russian population - which is around 145 million - also represents an important critical mass.

When, in March last year, Russia began mobilizing its troops to the Ukrainian border, it did so after having amassed at least $600 billion in reserves. Orro describes it as “a financial wall”, which is not only in dollars but in gold and other types of assets.

Moreover, according to the economist, Russia has strengthened all its state-owned companies by listing them on Wall Street and European markets. In short, through a strategy of paying high dividends, Russia’s state-owned natural gas company, Gazprom, for example, and many others, injected capital to finance their growth. In other words, the sanctions imposed by the West may hurt Russia, but they would also end up hurting the U.S. and European investors.

On the other hand, by mid-2021, according to Moody’s Analytics, Russia owed only about $76 billion on the international market. Its public debt would represent approximately 19.4 percent of the size of its economy.

But above all, according to Orro, anti-Russian strategies from the West denote little understanding of Ukraine, whose origin comes to the word “periphery”. Orro describes it as a society made up of three distinct origins, where one finds populations familiar with the Russian language and history, others disconnected from Russia, and a third, mainly in the capital, that considers itself Ukrainian with European aspirations.

In August 2021, when Putin published an essay in Modern Diplomacy about the historical, cultural, economic, and even religious elements that unite Russia and Ukraine, the Russian president argued that the West was trying to establish a kind of “Russophobia” from Kyiv, a strategy to which he would not give way and which had only served to turn Ukraine into one of the poorest economies in Europe.

Orro does not believe that Putin seeks to revive the pre-1991 Soviet map, as some have suggested. But he does understand that Russia will seek to consolidate in Belarus and Ukraine, one of the founding republics of the old USSR.

The economist also considers that the uncertainty surrounding Ukraine’s future and the ultimate effectiveness of Western economic sanctions against Russia highlight what has long been an anti-globalization movement.

“It is a movement that Donald Trump promoted, but it has been going on for a long time,” Orro said, arguing that movements such as Brexit are clear examples of how, increasingly -right or wrong-, the effectiveness of international organizations, supranational regulations and how these institutions limit the discretion of nations are being questioned from several angles.