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The ongoing war between Russia and Ukraine broke out when Russian President Vladimir Putin launched a full-scale assault on Ukraine on February 24, 2022. However, the war had become certain on February 21, 2022, when Putin had recognized the Ukrainian regions Luhansk and Donetsk as independent states, thereby ordering his army to enter these regions (Psaropoulos, 2022). The ongoing war had led to witnessing the traumatic consequence of war crimes, as well as led to a significant number of deaths, injuries, and prisoners of war constituting troops from both sides, as well as the civilians from Ukraine (Lukov, 2022). People also had to witness financial losses in both Russia and Ukraine. Contextually, the objective of the essay is to validate the thesis statement ’there have been severe economic consequences of Russia and Ukraine war’.
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Economic Sanctions from Russia and Ukraine War
After Putin launched a full-scale invasion of Ukraine, as well as witnessed war crimes, the US, EU, and other nations across the world imposed a series of economic sanctions. This has been such that Putin and Russia experienced international pressure and stopped the war immediately. Specifically, the sanctions have been such that “the US has barred Russia from making debt payments using the $600m it holds in US banks, making it harder for Russia to repay its international loans. Russia’s central bank assets have been frozen, to stop it using the $630bn (£470bn) of reserves it has in foreign currencies” (BBC, 2022). The economic consequence of the sanctions has been that since 1998, the country had first time defaulted on a debt. Another major sanction has been that Russia has been barred from international financial messaging system Swift, which in turn restricted and delayed the international payments. The majority of the countries including the UK have banned Russian companies from borrowing money, frozen the assets of all Russian banks, as well as limited the deposits from Russian firms and individuals. The US, the UK, and the EU among other nations have sanctioned over 1,000 Russian individuals, which mainly involve the businesspersons close to Kremlin, such as Roman Abramovich, as well as ministers involving Foreign Minister Sergei Lavrov. The UK also restricted the sale of “golden visas”, which contributes in attaining British residency rights by the rich Russians. The sanction has been on the export of dual-use goods, all Russian flights, Russian gold, export of luxury goods to Russia, as well as international companies such as McDonald’s, Coca-Cola, Starbucks, and Marks & Spencer have suspended their business in Russia (BBC, 2022). Thus, it is apparent that economic sanctions have been severe economic consequences for Russia after the war with Ukraine.
Global Natural Gas and Crude Oil Crisis from Russia and Ukraine War
The war between Russia and Ukraine has not only affected the economy of these two nations but also of other countries across the world, which are especially the ones that import natural gas and crude oil. This has because Russia has been one of the largest exporters of natural gas and crude oil. The economic sanctions on Russia regarding the use of the US Dollar in international trade have created a barrier for the natural gas and crude oil importing nations to purchase from Russia, which in turn increased the price in the global market (Mehta, 2022). Thus, eventually, it has led to increased inflation in most of the nations in the world because these commodities are required for the transportation of all other goods. Moreover, industrial production and operations, which is particularly the running of large machines, are dependent on liquid fuel, while some industrial products, such as paints are made up of petroleum. Besides, it is evident that “Russia’s dominance is particularly evident in Europe, where it supplies more than 20% of the continent’s oil and more than 30% of its gas. Several countries in Europe, including Austria, Finland, Poland, Slovakia, and Hungary are dependent on Russia for 50% to 100% of their oil and gas imports” (Ashraf et al., 2022). Thus, it is evident that the global natural gas and crude oil crisis with the war between Russia and Ukraine have led to severe global economic consequences with higher inflation.
Ukrainian Grain Export Crisis from Russia and Ukraine War
Ukraine has been one of the largest producers and exporters of grains, especially wheat. However, after the Russian full-scale invasion of Ukraine, it has become difficult for the latter to export and attain valuable monetary income in this crisis time. This Ukrainian grain export crisis has not only affected its national economy but also different grain importing nations in the world. It has led to the global food crisis and extensive price of rice; although recently Ukraine and Russia signed a deal to reopen their grain exporting ports (Bennett, Coleman & Co. Ltd, 2022). Thus, the Ukrainian grain export crisis from the war has led to severe global economic consequences with extensive food inflation.
Exchange Rate of Euro and Dollar after Russia and Ukraine War
The Russian war with Ukraine has severely affected the value of the Euro against the Dollar, as the former has severely depreciated. It has been the first time in 20 years that Euro has fallen below US Dollar. Since the start of the year, the euro has fallen nearly 12% against the US dollar (BBC, 2022a). This has been mainly because of the global energy crisis and Europe had been highly dependent on the Russian energy supplies.
Based on the overall discussion, it is apparent that there have been severe economic consequences of the Russia and Ukraine war, which have not only been faced by these two nations but other countries across the world. The economic crisis has been from the sanctions against Russia, Global Natural Gas and Crude Oil Crisis, problems in Ukrainian grain export, as well as depreciating value of the Euro against the US Dollar.
- Ashraf, M., Chidambaram, V., Kose, O., Kaponis, F., Ponticelli, S. & Kari, L. (2022). The war in Ukraine: A moment of reckoning for the oil and gas industry. Retrieved from https://www.accenture.com/us-en/insights/energy/ukraine-oil-gas
- BBC. (2022). What are the sanctions on Russia and are they hurting its economy? Retrieved from https://www.bbc.com/news/world-europe-60125659
- BBC. (2022a). Euro falls below dollar for first time in 20 years. Retrieved from https://www.bbc.com/news/business-62153251
- Bennett, Coleman & Co. Ltd. (2022). Ukraine, Russia sign deal to reopen grain export ports as war rages on. Retrieved from https://timesofindia.indiatimes.com/world/europe/ukraine-russia-sign-deal-to-reopen-grain-export-ports-as-war-rages-on/articleshow/93059108.cms
- Lukov, Y. (2022). Ukraine war: 21,000 alleged war crimes being investigated, prosecutor says. Retrieved from https://www.bbc.com/news/world-europe-62073669
- Mehta, V. S. (2022). After Ukraine, the new energy disorder. Retrieved from https://indianexpress.com/article/opinion/columns/russia-ukraine-war-energy-crisis-8006718/
- Psaropoulos, J. (2022). Timeline: The first 100 days of Russia’s war in Ukraine. Retrieved from https://www.aljazeera.com/features/2022/6/3/timeline-the-first-100-days-of-russias-war-in-ukraine