LGP at the 19th Vienna Economic Forum
On 14 November 2022, the 19th Vienna Economic Forum took place under the motto "Economy meets Politics in Difficult and Uncertain Times“. At the Forum, high-ranking decision-makers from economy and politics from 22 countries exchanged views on the current geopolitical challenges currently facing the world and in particular the CEE / SEE regions. In line with the motto “where there is a will, there is a way”, we heard some great ideas, positive investment examples, but also some critical positions that must be considered when making important policy decisions. And important decisions abound in the context of the climate crisis, the still tentative recovery from the Covid-Pandemic, and the major disruptions brought about by the war in Ukraine.
Dr. Lansky spoke about cooperation not only on a regional level but on a global scale, stressing the effect that the current crises and developments have on the world-wide economy. He invited the audience to consider several though-provoking aspects of the many implications and effects of the policies currently in force as a result of the war in Ukraine.
He started his keynote in breaking the current political situation’s major taboo by urging countries to examine possibilities of staying neutral in the current conflict. This evocative statement roused the discussion at this edition of the VEF, which reflected the fact that the current environment hardly permits neutrality.
Deliberately broadening the focus of the panel on “enhanced cooperation between regional economy and politics”, Dr. Lansky took account of the fact that the preeminent issues in today’s interconnected world affect global as well as regional cooperation and restricting one’s analysis to a single region omits important contiguities. Thus, the war in Ukraine and resulting wide-ranging sanctions have combined to produce a range of new challenges with global implications that are not restricted to South-Eastern Europe. Amongst these new challenges, the economic sanctions’ universal impact is most visible and discernible.
Dr. Lansky emphasized that Russia had already taken the steps to reduce the economic impact of Western sanctions and also applied countersanctions. Coming right after the Covid pandemic, the wide-ranging sanctions and countersanctions have severe impacts including inflation, rising debt levels, an energy crisis, a global food security crisis with risk of further political instability, supply chain issues, and a turmoil in currency and financial markets.
In describing the fallout on the political and economic order which we expect from the Russia sanctions, Mr. Lansky outlined several general trends.
First, the extensive imposition of sanctions by the developed world is damaging to the “rules-based order”.
In Ukraine, Russia has clearly violated the rules-based order; however, the sanctions have been seen by many to be serving the geopolitical interests of the few. Western sanctions contain measures to protect the sender countries’ interests to a degree, while lacking proper coordination to limit the impact on developing countries. For example, the EU does not tire to stress that their sanctions do not affect the grain and fertilizer sector – but smallholding farmers in Africa do not care or know that Russian grain and fertilizer have tripled or quadrupled in price because of sanctions against the insurance, or the banking, or shipping industries instead. This lack of coordination and solidarity with the global south is likely to undermine efforts to maintain or expand a rules-based order.
The Black Sea Grain Initiative mediated by the UN Secretary General and Turkey this July marked the first deal between Russia and Ukraine since the beginning of Russia’s invasion; this shows how important the role of a mediator is. We need mediators because otherwise, the consequences will be dramatic.
Second, China will try to further insulate itself against sanctions.
China will step up its efforts at challenging the Western economic order significantly and seek to develop partnerships with ‘sanctions resilience’ as the common theme. Beijing was certainly alarmed at the sudden and forceful imposition of sanctions by the West, something that Moscow had also not anticipated. Over the past months, Washington has imposed sanctions on China with the aim of cutting it off from important high-tech components central to the development of advanced computer and artificial intelligence capabilities, and Beijing will certainly to all that it can to heighten its resilience and independence from Western imports.
Third, the dollar-based reserve and cross-border payment system is going to face pressure.
The US Dollar is still by far the world’s most important reserve currency – but its share in global currency reserves has come down from about 70 percent to about 59 percent in the last twenty years.
In the context of the Ukraine war, there are concerns that dollar payments facilitate aggressive sanctions, and many alternative arrangements have been implemented to enable trade between Russia and India, China, Brazil, and others. Such arrangements could institutionalize to the extent that bilateral and regional trade in different parts of the world will permit increased usage of alternate currencies.
Additionally, Russia and China have announced interest in developing a BRICS reserve currency to counter the US-hegemony at the IMF. Meanwhile, Saudi Arabia is considering accepting Chinese Yuan from Beijing for its oil, and India is paying Russian oil in roubles. While the Dollar is not going to be replaced as the main reserve and cross-border trade currency anytime soon, the dominance of the dollar-based system is slowly eroding.
Building on these three observations, Dr. Lansky observed that public opinion was divided over the conceptualisation and implementation of modern sanction regimes. The unintended consequences of sanctions — particularly for the Global South and the developing world — have led to a condemnation of Western Countries and an increased attractivity of potential alternative systems. He concluded with an appeal against division and disunity – especially in the face of global threats that call for unified collective actions. “This is not a time for a break-up into separate economic spheres,” Dr. Lansky said, “we need cooperation and coordination amongst polities and economies more than ever!”
In addition to Dr. Gabriel Lansky, other prominent speakers at the VEF included: H.E. Mr. Albin Kurti, Prime Minister of Kosovo, DI Peter Umundum, VEF President, Mag. Peter Lennkh, Member of the Management Board, Corporate Banking, Raiffeisen Bank International AG, H.E. Ms. Mariya Gabriel, EU Commissioner for Innovation, Research, Culture, Education and Youth, H.E. Olivér Várhelyi, EU Commissioner for Neighbourhood and Enlargement, Dr. Achim Kaspar, COO, Verbund AG, Mr. Djordje Radulovic, Foreign Policy Advisor to the Prime Minister and Former Minister of Foreign Affairs of Montenegro, Mag. Peter Höfinger, Member of the Board of Vienna Insurance Group AG, Mag. Thomas Arnoldner, CEO of A1 Telekom Austria Group, Dr. Stephan Pachinger, LL.M, Partner, Freshfields Bruckhaus Deringer, Dr. Nina Drakic, President of the Chamber of Economy of Montenegro, Mr. Burak Bilge, CEO of Austria Card Türkiye, Mag. Teodora Georgieva, Executive Officer and Board Member of ICGB AD Gas Interconnector Greece – Bulgaria, Dr. Nikolay Tsenkov, Manager of Municipal Guarantee Fund of Sofia Municipality.