JAKARTA - The Minister of Finance for the 2013-2014 period, Chatib Basri, predicts that the military conflict in Eastern Europe between Russia and Ukraine is expected to last for quite a long time.
“A conflict that is viewed from the theory of bargaining power will end if one of the parties wins. Now, this victory depends on the endowment (support/endurance) from each party", he said through an online channel, Monday, April 4.
According to him, the prediction of a prolonged conflict is based on several assumptions. The first is the ability to survive the sanctions imposed.
“The simple logic is this, if Europe is strong enough to be affected by energy that is not available and can be stronger to last longer, Russia might lose. But if Russia has enough endowment, it has a long enough running current account surplus, then Russia can make this war last long enough that Europe will surrender", he said.
The Minister of Finance in the era of President Susilo Bambang Yudhoyono (SBY) then studied further the sanctions imposed on Russia.
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“A sanction will be effective or not if it is seen from two aspects, namely economic and political. So for today's case, the answer is that Russia and Putin are strong. Even Putin can constitutionally rule until around 2035", Chatib said.
"From an economic perspective, Russia is affected but they have a running account surplus that can last for several years, and have quite strong foreign exchange reserves. So I'm not going to say they're going to stick around forever but it's going to take a long time."
Chatib also sees the same conditions happening to many European countries as 'victims' of Russia's oil and gas policies.
"For Europe, they are also quite strong, so that there will be a long conflict. This condition will certainly have implications for a shortage of energy supply which will then trigger a relatively long inflationary period", explained Chatib.
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