Unprecedented Western sanctions imposed in response to the Ukraine conflict have had a significant impact on the Russian economy. However, the attempt to financially isolate Moscow now threatens the very countries that imposed it.
The global economy is already feeling the effects, as prices for critical commodities like oil, gas, and grain skyrocket. Economic sanctions aimed at Russia are beginning to have a significant economic impact on the economies of the United States, Europe, and other countries around the world, according to economists.
- Soaring energy prices hurting global consumers and households
The biggest and most immediate impact of sanctions is being felt in the petroleum and natural gas sectors, where Russia is one of the top exporters. Oil smashes $130/barrel this week, natural gas hits all-time high of $3,900/1,000 cubic meters, record US gas prices of $4.17/gallon
- Full-blown energy crisis could lead to global recession
A cutoff of Russia’s energy industry could mean severe consequences not just for Europe, but also for the US and the rest of the world as well. The IMF already calls spiraling energy prices “very serious” as inflations keeps shooting up. Analysts claim there is no way the US and Europe can replace Russian energy within 12 months
- Surging global food prices, other commodities
Sanctions against Moscow could derail the already reduced exports of food and critical agriculture-related goods from global breadbaskets Ukraine and Russia. Russian and Ukrainian wheat exports (30% of global market) and Russia’s nitrogen-based plant food production (14%) threatened; Aluminum, steel and nickel all hit record highs this week.
- Global aviation industry feels impact of Russia sanctions
The flight ban imposed by over 30 countries on Russian airlines and Moscow’s mirror response is having a ripple effect on global travel and the airline industry, which is already battered by the coronavirus pandemic. EU’s March 28 deadline for leasing companies to wind up contracts in Russia, flight bans and titanium supplies all driving up prices for airlines and customers.
- Russian isolation hurts European businesses
Russia has enjoyed close economic ties with European countries, so any trade and financial sanctions are likely to hurt both sides. But the loss of the Russian market, with a population of over 144 million people, is a huge blow to European businesses. During 2021, the volume of trade between Russia and the countries of the European Union increased by 42.7% in annual terms to over €247 billion. Russia was the fifth largest partner for EU exports of goods (4.1 %) and the third largest partner for EU imports of goods (7.5 %). The EU has already imposed several rounds of severe sanctions against Moscow, targeting the country’s banking and industrial sector, freezing its foreign reserves, and causing a mass exodus of foreign businesses from the country.