PACKILVANIA SANCTIONS AXDEL
BRINGING THE ECONOMIC FIGHT TO THE UNAC
21 FEBRUARY 2022
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Akhalibisi, Tuvaltastan - The government of Packilvania recently announced that they are imposing sanctions on Axdel. We aim to unpack the economic impact of these sanctions if any.
Quota on noble gases and raw urth metals: Noble gases are used to produce some forms of fluorescent lighting, LED displays, particle accelerators, satellite cooling systems, and lithography equipment. Raw earth metals are used as catalysts in reactions so they often work well in solar panels, microchips, lithium-ion batteries, and other components. Although Packilvania is not banning exports of noble gases and rare urth metals, they are making bilateral trade of these substances between Axdel and Packilvania more difficult. Bilateral sales of these substances are advantageous for Axdel because they circumvent the costs associated with buying them on the open market. Although the nominal prices might not change, real prices created by the diminished supply may make accessing these materials more costly for Axdelian manufacturers. Axdelian manufacturers can mitigate the effects of this by buying these substances on the open international market or using a third-party UNAC state as a transshipment port. Furthermore, it is unknown to what extent Axdel depends on Packilvanian imports at all. Overall, the effects of this on the Axdelian economy will be mild at most, but this is a powerful signal to Axdel that there are economic implications for geostrategic decisions.
Tariff hike on Axdelian steel imports: Although Packilvania has a domestic steel manufacturing industry, Axdelian refined metallurgical products (RMPs) are useful in a variety of applications such as construction, shipbuilding, manufacturing, etc. Axdel has proven to be particularly well-positioned in this sector and thus, these goods have been a lucrative source of foreign currency for the Axdelian economy. While UNAC markets are substantial, the construction and manufacturing boom in Packilvania proved a highly profitable buyer of Axdelian goods. Axdel also benefitted from the fact that it did not bear any of the last mile costs of selling RMPs to Packilvania as opposed to the UNAC where these costs are borne collectively. Again, it is unclear where Pax’s imports are significant.
Asset freezes on powerful individuals: The asset freezes on powerful people in the government are meant to pinch the elites especially if they have assets denominated in Packilvanian dinars or located in Packilvania. It is unknown how much wealth the sanctioned people have in Packilvania. We can only speculate whether this will have any impact at all. Nevertheless, unlike Packilvania where a small cohort of powerful people have much to lose through these kinds of sanctions, the reality is that the political and economic landscape in Axdel is more diverse. Furthermore, the rest of the UNAC provides a cushion against these kinds of actions.
On a scale of 1 to 10, these sanctions are a solid 3. The Packilvanian government clearly wants to give itself room to negotiate and is signaling strongly that it is willing to impose severe economic consequences on Axdel due to the Puntalian Crisis. Economic sanctions on their own do not achieve geostrategic goals but when used in conjunction with a variety of other measures, they can prove effective. Given the economic disparity between Pax and Axdel, it is unknown to what extent reciprocal sanctions from Andel might be impactful.
Nevertheless, Packilvania’s sanctions portend a slightly more severe problem. The economic consequences of the war are propagating and it is only a matter of time before they hit the UNAC. For instance, ASTRA’s work on the Soltan Nuclear Fission Reactor might face delays. Oan microchip manufacturing capabilities hinge on Axdelian tools many of which rely on noble gases for precision lasers. Space vehicles from Emberwood Coast rely on Axdelian components which in turn need rare urth metals. Thus, the UNAC will need to brace for the economic impact of these actions. Furthermore, it is unclear to what extent the UNAC will side with Axdel given that it did leave the PCT first and it is unclear to what extent Axdel consulted with them before acting. We patiently await Diego Corbinn’s government’s response to the matter.
The NCEF/UCA’s Heilen Plan is an interesting attempt to cushion against the effects of Packilvanian economic sanctions. This plan aims to decouple the extent of economic interlinkage between Pax and the UCA/NCEF as well as provide support to the UCA/NCEF and its allies. However, it is unclear how effective this plan is. Perhaps in the long term, it might be feasible, but it is incredibly difficult to decouple from countries with economies as large as Packilvania’s. For instance, most of the UCA/NCEF member states are developed, thus the costs of manufacturing and outsourced professional services like call center work and software development might increase. The question is the extent to which consumers in the UCA/NCEF will bear these effects and the kinds of demands they will make from their governments. Many of them are recovering from the last Puntalian Crisis as well as other disputes.
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AUTHOR IMAGE
Karas Endal
ACPO Correspondent