Paul Krugman: Even China can’t rescue Russia’s battered economy

The economic sanctions against Russia that the Biden Administration and its European NATO allies have unleashed in response to the Ukraine invasion have inflicted major pain on the Russian economy — and the sanctions could become even more painful if they are expanded to include Russia’s oil exports, which so far, have been exempted. Liberal economist and New York Times opinion columnist Paul Krugman examines Russia’s economic woes in response in his March 7 column, arguing that the pain is so deep that even China couldn’t rescue the Russian economy.

“In deciding to invade Ukraine, Vladimir Putin clearly misjudged everything,” Krugman writes. “He had an exaggerated view of his own nation’s military might…. He vastly underrated Ukrainian morale and military prowess, and failed to anticipate the resolve of democratic governments — especially, although not only, the Biden Administration, which, in case you haven’t noticed, has done a remarkable job on everything from arming Ukraine to rallying the West around financial sanctions.”

Krugman goes on to offer his “analysis of the effects of sanctions,” asking, “Can China, by offering itself as an alternative trading partner, bail out Putin’s economy?” And the economist’s answer to his question is “no.”

“Can China provide Putin with an economic lifeline? I’d say no, for four reasons,” Krugman argues. “First, China, despite being an economic powerhouse, isn’t in a position to supply some things Russia needs, like spare parts for western-made airplanes and high-end semiconductor chips.”

Krugman continues, “Second, while China itself isn’t joining in the sanctions, it is deeply integrated into the world economy…. Third, China and Russia are very far apart geographically. Yes, they share a border. But most of Russia’s economy is west of the Urals, while most of China’s is near its east coast. Beijing is 3500 miles from Moscow…. Finally, a point I don’t think gets enough emphasis is the extreme difference in economic power between Russia and China.”

China, according to Krugman, “can’t insulate Russia from the consequences of the Ukraine invasion” —and those consequences have been severe.

“The West has…. largely cut off Russia’s access to the world banking system, which is a very big deal,” Krugman explains. “Russian exporters may be able to get their stuff out of the country, but it’s now hard for them to get paid. Probably even more important, it’s hard for Russia to pay for imports — sorry, but you can’t carry out modern international trade with briefcases full of $100 bills…. Russia is going to pay a very high price, in money as well as blood, for Putin’s megalomania.”