A new world order

by Christian Siviere

Russia’s invasion of Ukraine on February 24 marked the beginning of a new era, and a very dangerous one too. In countries like Canada, where information travels freely, we watched with horror as this unprovoked attack unfolded – the systematic destruction, the daily bombing of innocent civilians, and the ensuing misery.

Christian Sivière runs Solimpex and is an international trade consultant and lecturer.

The world’s democracies, united around the U.S., Europe, Japan, Australia, New Zealand, Canada and NATO, have taken sanctions against Russia and are helping Ukraine with financial and military assistance.

What is particularly upsetting is the number of countries that are either openly or indirectly supporting Russia, namely: China, India, Brazil, South Africa, all of South East Asia (with the exception of Singapore), most Middle Eastern, and many African countries. Many of these countries are led by despots who control information and where, like in Russia, ordinary people are not informed of what’s really going on.

Brainwashing

Since the Bolshevik Revolution and Stalin, several generations of Russians have been brainwashed into believing that when Russia invades and/or destroys a neighbouring country – for example, Grozny, the capital of Chechnya in 1999; Georgia in 2008; Ukraine in 2014; and again in 2022 – it’s for legitimate purposes and the Russians are the “good guys”.

With the Russian attack on Ukraine, disinformation and cynicism are reaching new heights. Ordinary Russians don’t know what is happening in Ukraine and ordinary Chinese, Indian or South Africans likely don’t know either. China, India and many other countries are only too happy to purchase discounted Russian oil and gas, helping Russia bypass Western sanctions. Even smaller countries are siding with Russia. Morocco, for example, opened its airspace and its airports to Russian flights.

Who to trade with?

Do we really want to encourage trade with these regimes and these countries? Is it really in our interest to seek free trade agreements with countries that are openly siding with Russia?

The Russian regime under Putin has shown its true nature and total disrespect of international law, not just the “laws of war” and the treatment of civilians, but also international trade laws. For example, the Kremlin has “stolen” more than 150 foreign-owned commercial planes, owned by Western leasing companies, and re-registered them in Russia, to prevent their rightful owners from seizing them.

Intellectual property

International intellectual property rights are another example. In early March, the Russian government issued a decree stipulating that Russian companies are no longer obliged to compensate owners of patents, models or industrial designs from “unfriendly countries”, i.e. countries that have issued sanctions.

In effect, Russian businesses can use intellectual property owned by others without seeking consent or paying royalties, effectively legalizing intellectual piracy. Countries that support Russia are their partners in crime, and as a trading nation, Canada should take good note of this.

Impact on prices

As far as international trade is concerned, the war had immediate consequences. As world economies were still recovering from the upheavals, shortages, increased costs and uncertainties caused by the pandemic, the Russian aggression had a brutal impact on commodity and energy prices.

Russian forces have riddled Ukrainian fields with mines, stolen crops, and destroyed equipment to damage the country’s agricultural industry. Soybean prices are up 27 percent and corn futures 37 percent so far this year, as Ukraine is an important producer of these crops, along with wheat.

In addition to being a major supplier of nickel, steel and aluminum, Russia supplies 40 percent of the world’s palladium and 30 percent of the world’s titanium. The world will experience shortages of these commodities, leading to increased costs, and fuelling inflation.

Europe is particularly vulnerable as 40 percent of the natural gas it consumes comes from Russia. About a third of this natural gas flows via pipeline through Ukraine.

The end of globalization?

Does this signal the end of globalization? Not really. Globalization as we know it, moving production to the absolute lowest- cost country, will be replaced by a mix, taking into account both costs and risks, which will lead to some reshoring and more regional supply chains. Reshoring in the U.S. will create opportunities for Canada.

For the reasons outlined above, trade policies will have to take geopolitics in consideration. This may lead to the strengthening and reshuffling of alliances, as some countries will have to choose sides.