As the Russian invasion of Ukraine hits the thirteenth day, lots of tensions arose in Europe as to the dimension the continent will face in the few coming years, in a bid to de-escalate the war, many sanctions had been put in place for Russia’s government and oligarch so as to cut off their economic prowess of growing militarily, but where do global economy stand?
In announcing the sanction was the President of USA, Joe Biden in his live telecast on the Ukrainian crisis, where he also urged other NATO members in following suit, despite days of sanctions against Russia, President Putin remained unshaken in his military operation in Ukraine, with reports analyzing on the facts that, Russia amount for 40% of gas and oil deposit used by Europe and America, which will, in turn, have effects economically if cut off.
With Shell company recently apologizing for trading in oil with Russia, an insight is taken on how sanctions on Russia will affect the world economy.
According to the recent reaction by Russia on international sanctions, Russia had closed her airlines for an international movement to countries in Europe with the exclusion of Belarus, geographically located in Russia to the Eastern part of the continent (Middle and the Far East), and it serve as an easier route for some countries traveling to and fro the two continents.
With the airline closure of Russia and Ukraine, countries bordering them and Belarus will technically have to go through other routes in order to get to Asia.
Analytically the closure of both airspace will bother the transaction between the two continents, as the price of airlines will be on the hike due to the longer distance as other routes, the financial capacity of travelers and investors will be restrained, which will feel pivotal in the decrease in numbers of travelers due to price inflation.
Oil And Gas Sector
The most affected part on the economic aspect will be felt on the oil and gas industry, according to research, the oil and gas deposit of Russia amount to over 40% used in Europe and America, with the price of oil barrels rising up to $139 per barrel, the oil international markets is shaking due to low supply of oil, according to Opec, oil and gas deposit from Russia can’t be cut off from international markets due to the low output of the resources.
U.S stocks fell on Tuesday following their announcement of a ban on Russian oil, with the prices closed at $123 a barrel, the highest since 2008. The US is already witnessing an average price of a gallon of gasoline hitting a record $4.17, and an inflation of 7.5% hitting a record in 40 years, reported CGTN.
According to a report from Kremlin, they had threatened to cut Europe’s gas supply, and action which might bring the price of oil per barrel to $300, which will lead to a high rate of inflations in the Western World, should Russia cut off their supply, the global market will be on the downturn as most countries and companies banks on oil and gas for their economic activities, the end result will be 80% rise in the price of commodities.
According to the United nation world food program, the crises in Ukraine will have a negative impact on agricultural products like wheat, should the crises continue, the price of pieces of bread and wheat will soar higher due to their large reserve as one of the highest exporters of wheat.
The disconnection of Russia from the most international transactions has been a hit on the global trade, the inability to transfer financially to Russia has made some companies base or have a link to Russia to meet a decline in the global transaction, the recent withdrawal of Russia from SWIFT banking system had adversely affected trade between countries with Russia.
Added to it was the halt in the operation of MasterCard and Debit card in Russia which had limited trade and increased the interest rate in the company to over 10%.
While the sanctions on Russia had gone wide, the communication sector was the recent ban operation in Russia, Facebook, Twitter, YouTube, and others closed their operation in Russia which had a limited income to the major giant tech companies. While some tech companies’ sanctions began rising, the increase in the use of VPN surged over to 668%.
With the continuing conflict, the demographic population of major countries has been on the rise increasingly, as per research, more than 1.2 million people have been displaced which had brought a sharp increase in the production capacity of the neighboring country, and likewise affect the housing scheme of particular countries.
Should the conflict continue to escalate, the world can’t do without a high increase in price in production and commodity.