Still pondering the challenges of developed economies

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J. Soedradjad Djiwandono
J. Soedradjad Djiwandono, Emeritus Professor of Economics, Faculty of Economics and Business, Universitas Indonesia, and Adjunct Professor of International Economics, S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU), Singapore.

Jakarta, IO – In my previous column I referred to the meeting of the G7 Summit in Bavaria, Germany, a session which planned to discuss, among other issues, the possibility of Russia completely shutting down its gas exports to European countries, a drastic move that would certainly entail major problems for these countries’ economies, along with high inflation, potential rationing of fuel and other inconveniences. The next issue would be how to address this issue and come out well. 

It is now being reported that the G7 are more determined than ever in their effort to impose a heavy toll on Russia and inflict damage on its economy. The G7 proposes to cap prices on energy imports, looking to cut Russian revenues from its exports. For this to work, the G7 would put pressure countries like India, Indonesia, South Africa and Argentina, nations who, since the NATO member reactions to the Ukraine war, began to import oil from Russia, under terms determined by Russia, leaning on them to cooperate with the plan to cap energy prices. 

A sign that Russia’s economy may be starting to crack is the recent report that it failed to make payment of USD 100 million in interest due on bonds held by the Russian Federation. In other words, Russia is apparently in danger of going bankrupt, as Argentina did several years back.