那些被制裁最最严重的国家，都怎么样了?

Hi everyone!

Today we're going to talk about

a term you've probably heard more frequently

that is

sanctions .

We'll examine sanctions imposed on five of

the most distinctive,

influential,

and well-known countries

understand what they are all about

At the same time, we'll also explore

the underlying logic of sanctions,

their methods,

how the sanctioned countries can retaliate,

and most importantly, whether

these sanctions are actually effective.

First, let me test your knowledge

Do you know which country has been

under continuous sanctions for the longest period since World War II ?

It's Cuba!

In 1959, Castro's revolution

overthrew the pro-American Batista government.

Cuba embarked on the socialist path,

adopted a planned economy,

and became very close to the Soviet Union.

In 1962, the world was shaken by the outbreak of the Cuban Missile Crisis.

US and the Soviet Union confront each other in Cuba,

nearly triggering World War III.

Ultimately, the Soviet Union agreed to remove the Cuban Missiles

and the US pledged not to invade Cuba.

While this averted a hot war

the US immediately played its first

high-intensity card

economic sanctions

Actually before Castro was in power

the US had already begun sanctioning Cuba

prohibiting oil exports

and reducing sugar import quotas.

However, after the 1962 missile crisis,

the intensity of these sanctions

increased by several orders of magnitude.

In 1963, Kennedy issued

the Cuban Assets Control Act, a

comprehensive ban on all Cuban imports

and strict restrictions on exports,

thus initiating a complete trade blockade against Cuba.

These sanctions were quickly escalated

they froze Cuban assets in the United States.

Those Cuban companies in the US were told to

shut down

their earnings

and savings in the US were frozen

This is essentially the two most

classic forms of economic sanctions :

trade blockade and asset freezing.

A trade blockade means I won't buy from you,

preventing you from making money

and I also won't sell to you,

causing shortages.

Asset freezing

means freezing all of

your country's government assets

within my territory.

Even if you want to withdraw

or do business with others,

you can't.

So, how effective are

these harsh sanctions?

The answer is

not so good .

After 1963, Cuba's

economy and foreign trade

continued to grow.

Why?

Because it had a powerful backer

Soviet Union

The Soviet Union and several socialist countries in Eastern Europe

accounted for three-quarters of Cuba’s foreign trade.

They not only being Cuba's largest export market

but also providing Cuba with substantial

material and energy subsidies,

especially sugar

At the time, the Soviet Union would import Cuban sugar

at six times the market price

basically, giving money away.

With such strong strategic support,

even under the very nose of the United States,

the US couldn't do much about it.

However, after the collapse of the Soviet Union, things changed.

Cuba's backers disappeared overnight

and it experienced the most severe economic crisis in its history.

From 1990 to 1993,

its GDP shrank by about one-third,

foreign trade declined by 60%, there was

a severe shortage of goods,

many areas experienced power outages for 8 to 16 hours a day,

and food supplies were strictly limited

How limited was it

The average adult weight in Cuba

dropped by 5-10 kilograms.

You can imagine

how bad that period was for the Cuban economy.

There's a specific term in economics

called "special period,"

it wasn't called Cuba 's special period

just special period

You can see how special it was.

However, despite such a huge impact,

Cuba recovered quickly.

This special period lasted less than five years.

Especially after 2000

look at how rapidly Cuba's GDP grew!

Why?

Did the US ease sanctions?

Actually no

it might have even intensified.

They just made it through

Its recovery was due to economic reforms,

such as the rapid development of tourism,

but there was also a very crucial point

it solved a very, very core problem

energy.

Cuba previously relied heavily

on the Soviet Union for energy

but after the collapse of the Soviet Union,

Russia's attitude towards Cuba became very cold.

So, Cuba sought

a new ally

and right in front of it

was a major oil producer

that is

Venezuela

Venezuela too

was later embroiled in sanctions, which

we'll discuss later.

However, since the 1990s,

it has maintained a very close relationship with Cuba.

Venezuelan President Hugo Chávez and Fidel Castro

had a very good personal relationship.

Chávez often said that Castro

was his mentor,

and he even

flew to Cuba specifically

to attend Castro's birthday party as a surprise.

In short, Venezuela

not only helped Cuba through its most difficult period

but also arguably

revitalized Cuba's economy.

Actually, relations between the US and Cuba

haven't always been so tense.

In 2009, during Obama's presidency,

there was a period of thawing between Cuba and the US,

and the two countries even established diplomatic relations in 2015.

But then Trump took office,

and Obama's promises no longer held true.

Cuba was subject to sanctions again

and it was relisted as

a state sponsor of terrorism,

with over 200 additional sanctions imposed.

The US will not lift sanctions against Cuba

unless it grants the Cuban people

complete political freedom .

This year, Trump signed a memorandum

to further tighten

sanctions against Cuba

and the US has returned to a pattern of extreme sanctions

and embargoes against Cuba.

I suspect

many people, influenced by media reports,

feel that Cuba is a poor and underdeveloped country.

It does face humanitarian problems

due to US restrictions on supplies

making it difficult to buy iPhones

and even access McDonald's.

However, if you look at its GDP growth, as

we just saw,

the curve is astonishing.

In 2020, its per capita GDP

approached $10,000,

surpassing Mexico

and more than double that of Vietnam.

Overall,

its economic growth rate is quite good,

seemingly unaffected by the sanctions.

Why?

Well, it's easy to understand.

Besides the US,

no other countries

have imposed sanctions on Cuba.

In fact,

most countries

strongly oppose

the excessive US sanctions against Cuba.

For example, in 2024,

the UN passed a resolution

to end US sanctions against Cuba's economy

commercial and financial blockade

A voting was held on this

resulted in 187 votes in favour,

2 against (US and Israel)

and 1 abstention

from Moldova.

This resolution,

originating from the UN General Assembly,

is not legally binding ;

it's merely a recommendation.

However, you can see that

most countries' stance is very clear:

this

is purely humanitarian oppression,

and Cuba hasn't done anything particularly heinous,

This is a bit unfair.

Anyway, that's the gist of it.

Currently,

Cuba has very close trading partners

with Venezuela, the EU, China, and others,

but there's still a significant trade deficit.

Trade channels aren't very smooth, and

in the last two years, Cuba has been mired in an economic crisis

We'll discuss this in detail

if we have a chance to talk about Cuba on its own.

What exactly are economic sanctions?

They are a form of coercion that

attempts to force an actor to change their behavior by

disrupting economic exchanges.

Simply put, it's about making things difficult,

causing annoyance,

and inflicting pain

forcing you to compromise

and make concessions

Economic sanctions

are generally not an end in themselves,

but rather a means

to deter the other party and achieve certain goals

Common goals include

policy changes,

regime change,

eliminating terrorism,

ending wars

human rights, democracy, and so on.

In the Cuban case,

although the US appears to have many goals

the most fundamental and core one

is regime change.

From this perspective,

the US sanctions against Cuba are certainly unsuccessful.

In fact, historically,

the percentage of sanctions that actually achieve their objectives

is very low,

less than 10%

But there are successful examples

A typical one is South Africa.

From 1948, it

implemented apartheid, with

a minority of whites

ruling over the majority of blacks and people of colour.

Later, in the 1980s,

almost all countries in the world unified

in imposing economic sanctions on South Africa

cutting off its trade

and aid.

You have to understand that South Africa was heavily reliant on its gold and

mineral exports,

so this blow was very powerful.

Coupled with external public opinion pressure and

internal resistance movements,

it successfully forced the South African government

to release Mandela in 1990,

gradually abolishing apartheid.

Then the West slowly eased its sanctions.

This is a very successful example.

You see,

the main difference between South Africa and Cuba

is that other countries pulled in.

The effect of sanctions greatly amplifies

However, even with global cooperation,

some countries can withstand the pressure.

Even the US, which only intends to sanction

one country, has its own

methods.

But wait,

we'll see soon enough.

Cuba

has been sanctioned for years, and

its economy is actually still relatively stable.

But its close ally,

Venezuela,

After being sanctioned

has become one of the worst-performing

economies in the world

Venezuela has the world's

largest proven oil reserves,

and should

theoretically be

one of the richest countries in

the 20th century.

Instead, it's in complete chaos.

Let's talk about what happened in Venezuela.

In 2005, the US began sanctions against Venezuela.

Initially, the sanctions imposed on Venezuela were not very broad

Mostly about

widespread drug abuse

combating terrorism

poor cooperation

Individuals were being targeted

including government officials

adding up to dozens of people

and sanction was imposed

Later,

due to Venezuela's dire economic situation and

severe inflation,

the public could no longer tolerate

leading to nearly ten thousand

nationwide protests in 2014.

Maduro

responded with a strong crackdown

on these protests,

which the United States deemed

a human rights violation by the Venezuelan government.

This prompted the US to impose sanctions and pressure,

and Obama signed

the "Venezuela Human Rights and Civil Society Protection Act of 2014"

began imposing sanctions on more government officials

and official entities

but so far

it has remained a targeted attack on individuals.

As we mentioned earlier,

sanction methods

typically include trade sanctions and asset freezes,

which are already quite severe.

However sanctions

usually don't start so severely;

they usually begin with certain individuals, entities, or

companies.

This may not have a significant impact

on reversing the overall situation

it only targets those individuals.

And these targeted individuals

are usually very powerful domestically, making

them difficult to target.

Therefore, it becomes symbolic,

expressing a tough stance,

as if to say, "Don't let me catch you,

or else

you’ll pay for it"

In 2014,

the sanctions imposed on Venezuela

weren't just imposed by the US,

Canada, the EU, the UK, joined in

but they were relatively restrained,

targeting individuals or certain weapons.

But then came

Trump.

At the start of his first term, he began to exert pressure.

In 2017,

the US began imposing sanctions

on Venezuela at the national level,

prohibiting its bonds from trading in the US market

essentially preventing it from accessing the US financial market.

Some might think this sounds alright

It's just preventing it from financing in the US, right?

But let me tell you,

this is actually extremely detrimental to Venezuela.

The US essentially orchestrated a precise strike.

On who?

It's Venezuela's state-owned oil company, PDVSA.

We all know that fossil fuels

like oil and natural gas

are crucial for countries

that rely heavily on them.

Such as Iran and Russia.

However, oil is even more important for Venezuela

especially to the government

It's more important

because Venezuela's economy is in dire straits.

Government revenue comes almost entirely from oil.

While Iran and Russia

at least have relatively well-established economic frameworks

whether above-ground or underground,

whatever their structure—

they have their own set of operating rules.

But Venezuela's economy

aside from oil, is essentially a disorganized mess.

It has such a significant weakness that

the US naturally targeted it,

starting with financial sanctions,

because its oil companies

were previously heavily reliant on the US financial market.

The company seeking financing

was excluded, its cash flow

was immediately disrupted,

and its external trade activities

became virtually impossible.

Later, in 2019,

the US

imposed further sanctions

on the Venezuelan oil company,

such as blocking payments

and freezing assets

As a sanctioned country,

its usual countermeasures are not hard to imagine

it quickly seeks other buyers,

finding alternative buyers

With such a scarce resource as oil, if

the US sanctions me,

Europe sanctions me—

there will always be someone who needs it.

Even if it's a bit troublesome

but in most cases,

alternative buyers can be found;

it won't be completely blocked.

You see, after Venezuela was sanctioned,

President Maduro

immediately moved the oil company's European office

from Lisbon to Moscow

and began to sell a large amount of crude oil to Russia,

which then resells it to other countries

primarily India.

However,

these alternative solutions are more expensive

and have limited demand.

Therefore, after the sanctions,

Venezuela's oil revenue plummeted,

with government revenue as a percentage of GDP

falling from around 30%

to less than 10%.

Simultaneously, its financing channels were blocked by the US.

Imagine if your

income were cut by a third,

and loans were restricted

small loans, consumer loans, all were off-limits—

you'd definitely cut all unnecessary expenses.

If a chair leg breaks,

you'll prop it up with stones;

if you catch a cold

you'll bear it ;

if a light bulb burns out

you'll go to bed early

if the toilet breaks

you'll use a public restroom.

Venezuela is pretty much the same

They began drastically cutting spending on

basic necessities and infrastructure maintenance,

leading to severe aging of many infrastructure projects,

frequent power outages, and

difficulties maintaining the water, sanitation, and healthcare systems.

Venezuela's economy completely collapsed,

with inflation exceeding 300,000 percent in 2019.

Recently, relations between the US and Venezuela have become even more tense.

The US, citing "drugs,"

has bombed several Venezuelan ships.

The State Department and the Department of Justice have also offered a $50 million

reward for information

leading to the arrest or conviction of Maduro

The official reasons

given by the US for targeting Maduro

are twofold: his alleged involvement in drugs

and his alleged suppression of democracy.

However, in all fairness, given

his dire economic situation,

we cannot solely blame sanctions,

and even sanctions alone

cannot address this issue.

We definitely won't go into detail about that today

To be honest,

the countries we've talked about today

are all very interesting

even quite bizarre.

We'll dedicate a separate episode to them if we have the chance.

But today,

our focus is still on sanctions.

After entering hyperinflation,

for ordinary people,

water and electricity outages are commonplace.

The banknotes are so hot to hold

that they feel like they need to queue for a whole day to buy food.

But even though the situation is already so bad,

it can be said that sanctions have

pushed Venezuela's economy into an abyss.

But at least so far,

the purpose of these sanctions has not been achieved

Maduro is still the president.

Look at the examples of Venezuela and Cuba, and

we have found a very important underlying principle

is that economic sanctions

regardless of who they target

it ultimately directly oppress

the lives of the lower classes in the sanctioned country.

The cruel logic behind this

is the hope that by oppressing the lower classes and

the masses, they

can drive internal change within the sanctioned country.

In fact, both

the sanctioning

and sanctioned countries' elites

are well aware of this

which is quite ironic, isn't it?

Because often, the reason for sanctions is that

the sanctioned country suppresses democracy and

violates human rights.

So, how about this:

I'll further oppress your lives,

making you even more miserable,

to increase your determination to resist,

right?

Let's leave it at that.

We'll look at the next country,

North Korea.

The sanctions against North Korea

mainly revolve around nuclear weapons

or more precisely, it's about

weapons of mass destruction.

In 1994, the United States and North Korea reached the Agreed Framework on nuclear issues

with North Korea agreeing to freeze its nuclear program

and accept monitoring by the International Atomic Energy Agency

The US, in turn, provided two light-water reactors

oil and

gradually liberalised its economy.

However, this agreement didn't last long;

relations collapsed in 2002,

with both sides accusing the other of

failing to fulfill its obligations under the agreement

We won't go into the details,

but the agreement broke down,

and North Korea

withdrew from the Treaty on the Non-Proliferation of Nuclear Weapons in 2003.

Afterwards,

China, Japan, North Korea, South Korea, Russia, and the United States

held multiple rounds of the Six-Party Talks

regarding the North Korean nuclear issue,

but it was difficult to reach a substantial agreement.

In 2006, North Korea conducted its first nuclear test,

shocking the world.

The UN Security Council immediately passed Resolution 1718,

imposing economic, military, and trade sanctions on North Korea.

In short,

since then,

North Korea has continued to conduct nuclear tests,

and the UN has continuously increased sanctions against it.

Every time North Korea conducts a test or launches a missile,

the UN passes a new sanctions package,

including personal asset sanctions, financial sanctions,

and trade sanctions

at least eight resolutions have been passed

to expand sanctions against North Korea

You should know that

the UN rarely imposes sanctions on

a country as a whole

or on its government;

most of the time it targets individuals

or entities.

Why?

Firstly, imposing sanctions on an entire country

would be too strong and overwhelming;

secondly

the UN Security Council is

sometimes

it's difficult to reach a consensus.

For the UN Security Council

to pass a sanctions resolution,

it requires a majority vote of all 15 member states.

More importantly,

it's rare for the five permanent members

not to veto it.

For example, in 2022,

US attempted to push for

expanded UN sanctions against North Korea

but this was vetoed by China and Russia.

In short,

UN's numerous rounds of sanctions against North Korea

are arguably among

the most severe globally in terms of scope.

Yet, North Korea

continues to act unilaterally.

You impose your sanctions,

I'll just keep doing mine.

Look, since 2012, during Kim Jong-un's administration,

the number of missiles North Korea has launched has increased significantly.

Isn't that surprising?

As we just mentioned,

sanctions require the cooperation of many countries.

Its effect is much stronger

As for North Korea

The UN has imposed joint sanctions

but North Korea hasn't been deterred;

instead, it has launched more missiles.

Why is it so defiant?

Well, on one hand,

it does indeed have a strong desire for nuclear weapons.

But a crucial point

is why sanctions aren't as effective

North Korea is extremely closed off.

Since World War II,

North Korea has been

one of the world's most closed economies.

It was relatively better during the Cold War, but

after the collapse of the Soviet Union,

North Korea became even more closed off.

Think about it:

the essence of sanctions is to isolate a country

but North Korea has already isolated itself first.

Therefore, imposing sanctions

on it is bound to be less effective.

In 2017, North Korea's exports as a percentage of GDP

had been reduced to only 1%.

You need to know this figure

countries with rates below 10% are very rare;

many European countries exceed 40%

with Singapore and the UAE exceeding 100%,

while North Korea's is only 1%.

Actually, North Korea has many ways to circumvent sanctions,

such as smuggling

and building its own hacker team

for money laundering.

I'll tell you, North Korean hackers

are quite skilled.

According to preliminary estimates

in the past eight years

they have launched dozens of large-scale cyberattacks

profiting over $3 billion.

But regardless,

North Korea's trade with the outside world is still very limited.

Speaking of which,

let me test you.

Do you know what

North Korea's main export product,

accounting for 40% of its exports in 2023,

is under the heavy pressure

of global sanctions?

Here are a few options:

A. Ore

B. Toys

C. Automobiles

D. None of the above

The answer is

D. None of the above

The remaining items are

also some of North Korea's major exports,

especially raw ores.

But its largest export product,

which I find quite amusing,

is wigs

including human hair, beards,

and false eyelashes.

In 2023, North Korea exported

1,680 tons of wigs to China.

To put that into perspective,

I roughly estimated

that it's equivalent to

the hair volume of 150 million adult women with long hair.

North Korea's total population is

only about 26 million;

let's assume half of them are women.

The amount of wigs it exports annually

is enough to shave all the women in the country ten times over!

How is that possible?

Where does it get so many wigs every year?

Of course, some people

speculate that it doesn't actually export real human hair.

That's certainly possible

but the main reason

is that it first imports

"raw hair" from other countries,

just like with oil.

You import crude oil

and then refine it

For hair, I need to import raw hair.

For North Korea,

it mainly buys from India

processes it,

and then

packages or assembles it into various hair accessories

before exporting it globally.

Generally, it first goes through China

before being exported.

So you see, in 2023

North Korea's largest import

was hair

The next country we're going to talk about

that was sanctioned actually

had successful negotiations before

and more than once

that is Iran

We've discussed the Iranian economy separately;

today we'll mainly talk about the sanctions

In 1979,

Khomeini, the Islamic leader, had just successfully

overthrown the Pahlavi dynasty

and established the Islamic Republic of Iran.

The Pahlavi king fled overseas,

and then the famous hostage crisis occurred.

A group of Islamic students

stormed the US embassy in Tehran,

taking dozens of American diplomats hostage and

demanding the US hand over Pahlavi.

At that time, relations between Iran and the US were very tense,

and the US imposed

very severe economic sanctions on Iran

freezing $8.1 billion of Iranian assets in the US.

This was extremely devastating for Iran at the time,

and it also prohibited many of

Iran's economic and trade exchanges

You have to understand

back then,

economic sanctions weren't

as common as they are now;

the US hadn't used them much except for Cuba.

Iran honestly wasn’t prepared for that tactic

and unsure of its consequences

so they were extremely cautious,

employing

various negotiations

and threats .

After more than a year,

Iran released the US embassy personnel.

This action, while contributing

to the sanctions, can indeed be considered

a short-lived

but successful case.

In the following decades,

As the Iran-Iraq War progressed, support for regional armed groups

missile programs, and other initiatives gradually came to light

the US began to intensify its sanctions against Iran.

However, this period was relatively restrained,

primarily targeting individuals,

armed groups

or oil companies.

The real large-scale sanctions against Iran

began after 2000, when

there were indications that

Iran was secretly conducting nuclear tests

Once nuclear weapons are involved,

global sanctions intensify,

just like with North Korea

Not only the US,

but also the EU

and the UN Security Council began sanctioning Iran.

And this time, I'm telling you,

the US has pulled a more ruthless move

the second form of sanctions.

This is crucial

and became a hallmark of its subsequent

comprehensive economic sanctions.

This is secondary sanctions.

What are secondary sanctions?

It's not just about

escalating the situation.

It means not only that I won't do business with you anymore,

but I'll also threaten others

if I find out anyone

dares to do business with them, I'll deal with them too.

It's like a group of kids.

Previous sanctions were like the US threatening Iran, saying

"I'm not playing with you anymore

you can't touch anything I've used,

any toys I've played with,

or any seat I've sat in.

You 'd better avoid me."

See, that threat sounds very tough.

But even with its strong economy, the US only

accounts for a quarter of the world's GDP.

If you just threaten to stop playing with them,

Iran can still play with the other three-quarters of the kids, right?

It can still play with Europe, Russia, Japan,

and do business with those countries.

So the effect of those previous sanctions wasn't very obvious.

But this time, secondary sanctions

are like the US saying,

"Not only am I not playing with Iran,

but you other countries

Europe Russia Japan

can't play with Iran either.

Anyone who dares to play with them,

I'll deal with them"

You see, the US is the leader of the kids, right

He also has the largest muscle mass.

Other kids

generally

don't need to go against the US.

Anyway, I'm probably not very familiar with Iran

so I won't play with Iran

You see, secondary sanctions

are about threatening other countries to isolate together

which greatly increases the success rate of the sanctions.

For the US,

it's like leverage

the impact is much greater.

Let's analyse further.

Actually , there's a prerequisite

for implementing secondary sanctions

the US

itself must first be extremely powerful.

Look at the number of sanctions in history

you'll find that after year 2000

it increased exponentially.

You might ask why

Is it because

the world is much more chaotic after year 2000

Oh, not necessarily

One major reason

is that the world has shifted from a bipolar to

a unipolar system,

U.S. hegemony

making it easier for the US

to implement secondary sanctions.

This significantly increases the effectiveness of

US sanctions, leading to a greater frequency of their use.

For example, Venezuela, which we just discussed,

is severely restricted by sanctions,

primarily due to secondary sanctions

not trade, but

financial secondary sanction

Any other country

trading with Venezuela

cannot access US banks.

This has a very wide reach,

resulting in almost no one

daring to have financial dealings with Venezuela,

at least not openly.

In short,

in 2010, the US imposed even harsher sanctions on Iran

The UN sanctions

dealt a heavy blow to Iran

forcing it back to the negotiating table.

Starting in 2013, negotiation with various major powers

culminated in the

signing of the famous Iran nuclear deal in 2015.

Iran agreed to limit some of its nuclear activities

in exchange for a reduction in sanctions

This agreement

can be considered

a highlight in the history of economic sanctions negotiations

sanctions finally led to peace, and

a major agreement was reached.

Iran did indeed receive some economic relief,

with some assets unfrozen

and oil exports beginning to recover

However, this didn't last long.

Then came the revelation

the previous agreement with Iran

was a terrible deal, and

they reneged

reinstating and even

intensifying sanctions against Iran ,

causing a precipitous drop in oil exports.

This year, negotiations between Iran and the UN are on the verge of collapse.

The UN reinstated sanctions

against Iran in September.

We've discussed Iran's methods of evading sanctions

in detail before.

Over time,

it has developed

its own countermeasures system.

Through its ghost fleet at sea and

smuggling networks, it

has mitigated the intensity of sanctions to some extent

significantly strengthening

its two major economic arms

the Revolutionary Guard and the Foundation.

However, its overall economy is severely suppressed

under the heavy pressure of US sanctions

especially after the pandemic,

plunging into a severe food crisis,

energy crisis

and hyperinflation.

The riyal's continued plunge in exchange rate

confirms

our earlier theory that

sanctions further suppress Iran's lower classes.

Even if you believe

this is a necessary price to pay to achieve our goals,

and that the lower classes must be suppressed to a certain extent

before they can rise up and make changes

However,

there's an even harsher reality

often,

and most of the time,

sanctions not only fail

to create internal conflict within the sanctioned country,

but their propaganda actually

makes the lower classes more hostile to the sanctioning country.

The sanctioned government

often uses this environment to

further strengthen its authoritarianism

This has a counterproductive effect,

making change more difficult,

and the main consequence of sanctions

becomes

simply punishing and suppressing

the lower classes of the sanctioned country.

Okay next

the last sanctioned country we'll discuss

is a comprehensive summary

of all the methods we've mentioned.

The US and EU

have basically used all their sanctioning tactics

over the years on it.

I'm sure you've guessed it

it's Russia.

Before the Russo-Ukrainian war,

in 2014, Russia annexed Crimea, and many countries and regions, including

the US, EU, Canada, Australia, and

Japan,

imposed sanctions on Russia.

At the time, this was considered very severe;

in terms of the number of sanctioned items,

the largest at that time was Iran

has 3,616 sanctions,

while Russia ranks second

with 2,695 items.

That sounds like a lot, right?

But compared to subsequent sanctions, it's just a drop in the ocean.

After the Russia-Ukraine war,

the number of sanctions imposed on Russia increased tenfold,

exceeding 25,000.

Global countries imposed

the largest and

most numerous sanctions in history

I roughly divide the sanctions against Russia

into several categories.

First, I think everyone can answer immediately

those targeting individuals and entities.

Previously, most countries only

symbolically imposed these sanctions, but

they were actually quite effective

for Russia

because Russia

has many very wealthy oligarchs who

keep their money in overseas banks

or hide it overseas.

This includes bank assets,

apartments, and yachts.

It's estimated that a total

of $3 billion in assets belonging to Russian oligarchs has been frozen.

While this amount

may seem small in the grand scheme of things

The impact on Russia’s economy

was certainly small in proportion.

But it did hit the top levels

and elites of Russia with

remarkable precision

even restricting their travel abroad.

These wealthy individuals are likely furious.

The second major sanction against Russia is SWIFT.

Most people are familiar with it

SWIFT, short for Society for Worldwide Interbank Financial Telecommunication.

Simply put,

it's a standardised language

for global

interbank transfers

For example, international transfers

use a SWIFT code.

The SWIFT system

connects over 11,000 entities worldwide

we won't go into detail today.

In short,

most cross-border transfers between banks

must use the SWIFT standard.

Generally

if you don't use SWIFT,

the receiving bank won't accept it.

As part of the sanctions,

there are 45 Russian banks

and 4 Belarusian banks

have been banned from using SWIFT for international payments

effectively blocking most Russian banks.

Note that SWIFT doesn't completely block

overseas funding channels

After all, it's just a standardised language.

It’s like I’m cutting off your contact with the outside world

I’m not locking you up

or confiscate your phone

but many mainstream chat apps would become unusable

not even WeChat.

This way

would significantly increase the cost

of contacting others.

You'd either have to write a letter,

make a phone call

or develop your own APP

which would require the other party to cooperate by

writing letters, making phone calls, or using your APP

very inconvenient, right?

From a macro perspective, this inconvenience translates

into huge economic losses

and costs.

So how does Russia retaliate

against such economic sanctions?

In fact, it developed its own system

as early as 2014, the alternative to SWIFT

is called SPFS.

In the example we just discussed,

it's like they developed their own

chat app.

Developing such a system isn't difficult.

SWIFT itself isn't user-friendly;

it's slow and inefficient.

The key is that everyone uses it

creating a network effect.

Even if Russia's SPFS system

is well-developed,

the biggest challenge is

getting the other party’s banks to trust the system

and actually use it

and that takes time.

Currently about a quarter of cross-border payments

in Russia use SPFS

Other methods

include using

a friendly third-country bank,

or cryptocurrencies

they've also developed their own stablecoins

In general, excluding SWIFT

has significant impact on Russia's financial system.

The third major sanction against Russia

is the freezing of official assets,

primarily

the assets of the Russian central bank,

namely its foreign exchange reserves.

As mentioned earlier when discussing

Cuba and Iran

the US and Europe

freeze all

assets in banks and financial institutions

within a country they

can reach

This time,

approximately $300 billion of Russia's assets were frozen,

roughly half of its foreign exchange reserves.

And do you know which country

held the majority of this frozen money?

You probably wouldn't guess it

it's Belgium

Why Belgium?

Because Russia's central bank and

its foreign exchange reserves aren't all cash;

they've purchased a large amount of financial assets.

For example, European

and American bonds,

especially European bonds,

all need to be cleared

or managed

by a company called Euroclear.

Therefore, the European bonds purchased by the Russian central bank

all had to go through the Belgian company Euroclear.

Now, all of these have been frozen.

With the central bank's foreign exchange reserves frozen,

it's difficult for it to freely adjust the exchange rate.

This is why you see the ruble falling so sharply

at the beginning of the war.

However, Russia has one major advantage

it has a money-printing machine

its energy resources.

Russia's annual energy exports

can earn approximately $200-300 billion

So, the freezing of $300 billion in its central bank's reserves has

a significant short-term impact

but frankly,

in the long run, it will not be difficult for it to recover.

The next direction of sanctions,

is also the trade sanctions we mentioned earlier.

For Russia, it’s basically targeting its money-printing machine

oil and gas.

If you want to restrict Russian oil and gas,

the sanctioning country also faces difficulties

The EU is far too dependent on

Russian energy.

You see,

previously 45% of its natural gas,

almost half, came from Russia.

This is the kind of move that could hurt the enemy but end up hurting yourself even more

Frankly,

the EU just wanted to prove

itself right?

So you see, in 2022,

most European countries

were also facing their own energy crises

And because Russia's natural

gas and oil exports were so large,

the US and Europe didn't dare to directly ban them

for fear of triggering a global energy crisis.

So how did they finally decide to impose sanctions?

Russian can still export oil

but all seaborne oil shipments

were subject to a price cap.

This cap was set at $60 per barrel

at the end of 2022,

roughly 85% of the market price at the time.

The aim was

to restrict Russian revenue

without significantly impacting

global energy prices .

And do you know who the biggest beneficiary was?

We've mentioned it multiple times

It's india

When the West first proposed sanctions on Russian oil,

India objected,

saying, "you can impose sanctions

but I won't!

I don't agree to the price cap! "

As a result, India began

importing large quantities of Russian energy,

roughly 20 times the amount it imported before the war.

Actually, for the past 2 years

you can see that India's economy has developed very rapidly

which is largely related

to the cheap energy imports from Russia

Of course,

India's non-participation in sanctions also has its costs.

What are these costs?

Secondary sanctions.

Look at the US

this year, it first imposed a 25% basic tariff on India,

and a few days ago Trump said that

because India bought so much Russian oil

and did not comply with the price cap

he would impose an additional 25% tariff on it

In general,

one of the ways Russia circumvents

Western trade and

oil sanctions

is by selling to India

and China.

Its energy exports will certainly be suppressed

but it still has considerable revenue

which has become an important source of income

for it to resist sanctions.

At the same time, Russia also engages in a lot of smuggling

This is the border between Georgia and Russia.

The long line of trucks here

is all waiting to trade with Russia.

Hidden among them are many

luxury cars like Mercedes-Benz and BMW, which are subject to sanctions.

If you only look at official data,

you'll see that

Georgia's trade deficit in the past two years

is alarmingly high.

Its imports far exceed its exports.

Why?

Well, not only have imports increased, but

exports have also increased.

However, these are all smuggled into Russia and

not recorded in the official accounts,

so the officially reported

trade deficit appears significantly larger.

In essence, this means

Russia is using Georgia for transshipment

to evade sanctions.

Besides the official sanctions

we just mentioned, Russia

has also been impacted by another factor

You could also call it a sanction, which

I find quite interesting.

It's a self-sanction from overseas companies.

Many Western multinational brands,

even though they can still operate legally in Russia

are worried about public opinion risks

so they say, "I have to withdraw."

They sanction themselves by

moving their businesses out of Russia.

Imagine, within a week,

all the big brands we're familiar with are gone,

all closed down.

The impact is quite significant.

However, if you think about it carefully,

it doesn't mean that

a vacuum immediately appeared in these industries.

The original physical stores,

employees,

and supply chains are still there;

the companies have left.

But what can Russia do?

It can change the name but not the substance.

I can go with the original team.

immediately set up a new Russian knock-off

and continue operating

So at this time

There are many

comical knock-off brands appeared in Russia.

The original Starbucks became Stars Coffee,

Zara became Maag

Coca-Cola became Dobri Cola,

and many more.

We've discussed so many examples

but there's a fundamental principle about sanctions

which is that sanctions

are often more effective in the short term.

Economic sanctions

frequently catch countries off guard.

Once the sanctioned country recovers and

adjusts and

a new system is established,

the marginal effect diminishes sharply.

Look at why sanctions against Cuba and North Korea

haven't had such a significant impact.

They've been under sanctions for years and

have long since recovered

They've figured out their economic structures, resource channels,

and alternative solutions,

so they're not so afraid of sanctions.

The two successful negotiations between the US and Iran

were both quite sudden,

catching Iran off guard.

As for Russia,

although Western sanctions seem sudden

but you can see that Russia

secretly began preparing to counter them as early as 2014.

Sanctions are most effective when

the sanctioned country

hasn't yet formed a complete alternative system;

this is when the impact is highest

There is a strong incentive

to make concessions and negotiate,

but if no agreement is reached at the beginning,

the longer the sanctions drag on,

the less they

suppress the elites of the sanctioned country

and the more they suppress the lower classes .

It becomes difficult to reach an effective agreement,

leading to a stalemate.

Academically this

creates "sanction fatigue."

Once sanctions fatigue forms,

both the sanctioning and sanctioned countries

will have a group of vested interests,

making it even more difficult to lift sanctions.

This

creates a vicious cycle of sanctions,

ultimately evolving

into endless, slow oppression of the lower classes .

Actually, I've researched a huge amount of information and data on

each of the sanctioned countries

we've discussed today

However, to maintain a clear structure,

a manageable length

and easy-to-understand language

I've omitted many details and contents.

Of these countries,

we've already discussed Russia and Iran;

I will definitely tackle the rest one by one.

That's all for today.

That's all for today.