Humanitarian Catastrophe, Global Economic Crisis: Implications of Russian Sanctions
Russian sanctions seem to have had a significant impact on Europe. These serious consequences include inflation, which is now at 8% after briefly hitting 10%.
Following the Russian military operation in Ukraine, major Western countries and blocs such as Japan, European Union, Canada, United States, United Kingdom and Canada imposed various sanctions on Russia . These included restricting secondary trading of Russian government bonds, banning interactions with Russian banks, banning exports of critical technology to Russia, freezing assets and banning travel for the Russian elite.
These measures undoubtedly have global political and economic implications. The economic and financial sanctions imposed on Russia will alter the international economic system, with long-term implications for the functioning of the global economy. The Russian economy is small, but the current sanctions could have a big impact on the global economy; it exports some of the most important commodities in the world.
The negative effects of economic sanctions have been observed in various parts of the world, posing new challenges. The world is divided on how modern sanctions should be conceptualized and implemented. The G7 has fully supported US and European sanctions against Russia… Will the G7 leaders succeed in isolating Russia?… and many Western alliances and partner countries have joined the sanctions regime.
While several countries, including China, Argentina, South Africa, Mexico, Indonesia, Turkey and Serbia, have said they do not assume such sanctions are necessary and that they would not participate. Many others took a neutral stance and did not buy into the sanctions, despite no official statement to the contrary.
The Russian-Ukrainian crisis and subsequent sanctions imposed by Western countries are likely to disrupt commodity trade, especially oil and gas exports to Europe. As a significant risk, there is an increase in the prices of key commodities, which could lead to even higher global inflation and weaker global growth.
In addition, world oil and natural gas prices rose sharply, particularly in Europe, the United States and Asia/Pacific. In addition, the prices of essential mineral and food products have increased, including nickel, palladium, neon, wheat and corn. These increases, to some extent, reflected risk rather than existing penalties.
In addition, high commodity prices can dampen economic growth and, if prolonged or worsening, will almost certainly lead to an acceleration of high inflation in many countries, particularly in Europe. Sanctions, such as those imposed on Russia, cause serious dysfunction by causing serious supply disruptions in free markets. Furthermore, these sanctions encourage players to abandon common regulatory frameworks and payment systems that support global free markets.
In particular, in energy markets, decisions by the United States, United Kingdom and European Union to ban, phase out or drastically reduce Russian oil and gas imports have driven up energy prices and have a significant impact on global price stability, forcing central banks to maintain tight monetary policies and delay the recovery of a global economy still struggling with the ramifications of the pandemic.
Russian sanctions seem to have had a significant impact on Europe. These serious consequences include inflation, which is now at 8% after briefly hitting 10%; increases in food prices; and rising energy prices. Sanctions have caused inflation, which can be devastating to ordinary people, effectively punishing them for the actions of their leaders.
Significantly, due to globalization and interdependence, these sanctions are also likely to have significant ramifications for global well-being, affecting not only the livelihoods of ordinary Russians, but also those of many of the most vulnerable people in the world.
At least 5.5 million foreigners live in Russia, most of them from Central Asia and Eastern Europe. These workers send billions back to their countries of origin. Moreover, remittances from Russia account for up to a third of the GDP of Central Asian countries. Therefore, the depreciation of the ruble and the ensuing recession will almost certainly lead to a humanitarian disaster for these groups.
The ripple effects of sanctions, particularly for countries in the South and developing countries, have raised calls for a way forward that allows for a diplomatic solution and the cessation of sanctions. Although there are still several geopolitical uncertainties, the negative fallout from economic sanctions and counter-sanctions point to certain trends that may reshape the geoeconomic landscape.
The global economy will suffer long-term consequences as energy markets become tighter, food supply disruptions exacerbate food insecurity in the developing world, globalized trade shrinks and the inflation increases. Furthermore, the havoc wrought by EU sanctions on various sectors of the global economy and security is becoming increasingly evident.
More importantly, given Russia’s significant role as a commodity exporter, the inflationary effects of imposed sanctions extend beyond the target country to the global economy and the billions of people whose well-being being depends on the proper functioning of free markets.
If not carefully crafted, economic hostility against Russia could harm disadvantaged people around the world and cause long-term damage to the global economy. Therefore, Western policymakers must ensure the integrity and stability of the global economy. Sanctions against Russia must not undermine the foundations of global prosperity or jeopardize the livelihoods of vulnerable people around the world (Noema, Luthra, Butler, Kalish, 2022).