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Sloppy sanctions will blunt themselves

Nurse Svetlana Savchenko, 56, stands next to the building, destroyed during Ukraine-Russia conflict, where her apartment was located in the besieged southern port city of Mariupol, Ukraine March 30, 2022. REUTERS/Alexander Ermochenko – RC21DT9PX9PB

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MUMBAI, March 31 (Reuters Breakingviews) – The West has sown the seeds of a growing sanctions backlash in emerging markets. The United States designed the sweeping restrictions it slapped on Russia for its invasion of Ukraine to allow Europe to procure the energy it needs read more , and is coordinating gas deliveries to help keep the lights on. Now the White House has belatedly realised the brutal side-effects the measures are having on poorer nations.

A U.S. treasury official acknowledged the problem on Tuesday, noting allies must work together to address global food security challenges. Ukraine and Russia account for 38% of global wheat read more exports, and Russia is a major exporter of fertilisers, accounting for about one fifth of the market in some cases. Developing nations that struggled through the pandemic now face a food crisis that could destabilise their governments.

Waivers and workarounds, the traditional methods for granting relief to countries caught in diplomatic crossfire, might be less effective this time around given the sweeping scope of the sanctions and the complexity of trading links, exacerbated by logistical challenges as shippers struggle with poor security conditions and difficulties insuring themselves.

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Buying in bulk is one option. Rich nations could then subsidise wheat supplies and ensure they get to vulnerable importers like Turkey, Egypt and Lebanon. India is sitting on a huge surplus and is well-placed to plug some of the gap. Australia could help too. But it’s harder to coordinate a fix for fertiliser, a shortage of which could see crop yields halve; soaring prices for natural gas, a key input, have prompted companies like Norway’s Yara (YAR.OL) to cut output. Washington might have to guarantee customers to persuade it and others, including Canada’s $56 billion Nutrien (NTR.TO), the largest producer of another type of crop nutrient, potash, to ramp up production.

Even before the invasion of Ukraine, the United States was reviewing its reliance on sanctions. President Donald Trump’s administration increased the number of entities facing retaliation by a factor of ten. The side effects are starting to alienate otherwise sympathetic foreign governments the White House needs for wider global policy goals. The freezing of Russia’s foreign exchange will also encourage them to reduce dependence on the U.S. dollar and the American financial system. If there is too much sloppiness with sanctions, they will eventually blunt themselves.

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– The United States is looking to work with allies to address the food security challenges resulting from sanctions against Russia, Deputy Secretary of the Treasury Wally Adeyemo said in a speech delivered at Chatham House in London on March 29.

– “We must work collectively to address this challenge, using the tools that exist at the international organisations we helped to create,” he said.

– Much of the world is unable to get access to wheat and other products coming out of Ukraine due to the invasion, and Russia’s interference with shipping in the Black Sea is making the transport of other commodities difficult, Adeyemo added.

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Editing by Pete Sweeney and Katrina Hamlin

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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2022-03-30 22:42:00

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