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What could happen to SA if the Russia and Ukraine tensions escalate

Ukrainian servicemen look at a damaged residential building, after Russia launched a massive military operation against Ukraine, in Kyiv, Ukraine. Picture: Reuters/Valentyn Ogirenko

Ukrainian servicemen look at a damaged residential building, after Russia launched a massive military operation against Ukraine, in Kyiv, Ukraine. Picture: Reuters/Valentyn Ogirenko

Published Feb 27, 2022

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Cape Town - Earlier this week Russia launched attacks on Ukraine, with Russian President Vladimir Putin saying the “military operation” was to defend separatists in the east from “genocide”.

He also warned the West of “horrible consequences” if it interferes.

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Back home, President Cyril Ramaphosa called for the intervention of the UN Security Council in the conflict in Ukraine, while International Relations and Cooperation Minister Naledi Pandor said South Africa was calling for the easing of tensions between the two countries.

Professor Emeritus of International Law Professor André Thomashausen spoke to IOL on the impact of the tension on South Africa and what would happen if it escalated.

“There will be a price explosion in all energy markets if Russian gas supplies shift away from Europe to be redirected to China. China is welcoming large additional LNG supplies at a low price level to reduce their own dependency on coal and achieve better CO2 reduction targets and secure lower input costs for their industries.

“Gas prices in the EU could increase tenfold. This would provoke a price explosion for energy from other sources as all producers would adjust to the gas price levels. A huge jump in profits for the US-based producers of gas from fracking could be expected, and this is what the US is hoping for, regardless of the CO2 consequences that massive LNG shipping from the US to the EU would have,” he said.

Thomashausen added that South Africans could be hit hard if the tensions escalate.

“In as much as energy prices in the EU would jump up, international energy prices would follow. In a worst case scenario, South Africa could expect liquid fuel prices to increase to about R40 per litre. As Eskom energy production depends much on imported diesel, electricity prices could increase by up to 40%. This could have a devastating effect on all the parameters of the current budget and sink South Africa’s hopes for a post Covid economic recovery,” he said.

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Thomashausen noted that Russia has not cut any gas supplies to Europe, and has not threatened to do so, adding that “only a further escalation of the conflict could see the EU economies diving due to an energy crisis.”

“Currently, it is China that is pro-actively seeking to de-escalate the conflict and to re-engage the warring parties in negotiations. Everything points in the direction of the conflict ending peacefully in the very near future. China is showing a great measure of international responsibility for peace and security,” he said.

Thomashausen said the sanctions imposed on Russia could come to its exclusion from the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

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SWIFT is a Belgian communications system that serves as a neutral platform for banks to chat about financial transfers, transactions, and trades. According to Bloomberg, SWIFT now links more than 11 000 financial institutions in more than 200 countries and territories.

“The new sanctions imposed on Russia by the US, the UK, the EU, Japan and Australia are very comprehensive and could come to include an exclusion of Russia from the international clearance system SWIFT. But even without this happening, all major Russian banks and their subsidiaries have been sanctioned and this will include all credit card transactions with the sanctioned banks,” said Thomashausen.

So how will this affect South African banks?

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“South African Banks will have no choice but to comply, or else they themselves would be barred from many international transactions. There will be basically no more legal money transfers between South Africa and Russia.

“Fortunately, the main Russian investors in South Africa, with the many thousands of jobs that they provide, are technically not Russian investors, as their business in South Africa is conducted from other European domiciles such as Switzerland,” he said.

Thomashausen has also slammed the superpowers’ pursuit of “nationalist agendas” at the expense of smaller and poorer nations, calling it immoral.

“There is a global disregard of the UN Charter that forbids unilateral use of force, which includes the imposition of sanctions. The so-called West, the EU, the USA, Canada and Australia, represent a little over 10% of the World population but they continue to seek to determine the faith of everyone,” he said.

Is a third World War on the cards? Unlikely, says Thomashausen.

“I do not see a big risk of this happening simply because the EU and NATO do not have sufficient military capability to outlast a conflict with Russia for more than a few weeks. The enormous military strength of Russia is currently the most effective guarantee for peace in Europe,” he said.

However, this does not mean there is NO risk of it escalating to a nuclear level.

“But the risk of the conflict escalating to a nuclear level exists, as it is in the nature of conflicts for the losing party to throw its last and biggest rock before conceding defeat. In that case, South Africa will be a safe place, far removed from any nuclear fallout. Even a substantial rise in ocean levels will not affect most of the country. But the world as we know it, would cease to exist.

“In preparation for an Armageddon, South Africa would need to improve self-sufficiency and improve national skills levels and reduce import dependencies. And prepare for a massive influx of refugees from Europe and America,” he said.

IOL

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