US bitten by its own sanctions on Russia

The United States has teamed up with allies and imposed hefty economic sanctions on Russia.

As a consequence, the price of oil has risen to around US$110 per barrel.

According to the American Automobile Association, the price of petrol has risen to a national average of US$4.37 per gallon. Higher energy costs have depressed demand for goods and services and contributed to the highest US consumer price inflation in 40 years, at 8.5 per cent in March. Many Americans would rather the US stayed out of the conflict, as the economic and political fallout is already hurting their wallets.

Russia is a key exporter of oil, accounting for about 12 per cent of the world’s supply. It is also a producer of vital commodities such as neon, palladium and nickel, some of which are used to manufacture the semiconductor chips found in devices ranging from ATMs to BMW cars. Sanctions against Russia could make the current semiconductor shortage even worse, while restrictions on wheat or metals could drive inflation even higher.

The White House has largely left it to the Federal Reserve to stamp out inflation with interest rate rises ahead of this year’s midterm elections. Biden’s failure to control inflation is already undermining his presidency.

Biden should remember that in 1971, Richard Nixon imposed a freeze on wages and prices to counter inflation. Nixon’s successor, Gerald Ford, declared inflation “public enemy No 1”. History teaches us that inflation is a big problem for US presidents.

To cool down inflation, Biden ought to mitigate the conflict in Ukraine by adopting the following confidence-building measures: ban missile deployment, halt weapons deployment to Ukraine, roll back forces from Eastern Europe and remove sanctions against Russia. Some economists have also suggested that Biden could ease inflation by cancelling tariffs on Chinese goods.

Wanda Siu, Tuen Mun