Russian Sanctions And Their Economic Implications

As Russian intensified its attacks on Ukraine and its troops closed in on Ukrainian capital Kyiv, international sanctions on Russia are also tightening. The newest includes an American ban on imports of oil, gas and coal from Russia. Meanwhile, the exodus of multinational corporations from the West continues apace. To learn the definition of sanctions, you may sign up for economics tuition Singapore with a reputable economics tutor Singapore.

International Sanctions On Russia

Sanctions are penalties imposed by one country on another, usually arising from the latter breaking international law or acting aggressively. Since the outbreak of the Russia-Ukraine war, countries around the world, led by the US and the EU have imposed the toughest sanctions since the cold war. To inflict the maximum damage on the Russian economy, the US has announced a complete ban on Russian oil, gas and coal imports, the primary source of revenue for Russia. The UK will phase out Russian oil by the end of this year. The EU, which imports 40 per cent of its gas and 25 per cent of its oil from Russia, announced that it would reduce its Russian gas imports by two-thirds. It is the EU’s plan to switch to alternative supplies and become independent from Russian energy before 2030. In consultation with your economics tutor Singapore in your economics tuition Singapore class, discuss the economic implications of these sanctions on Russia. Sanctions is a double-edged sword. With guidance from your economics tutor Singapore in economics tuition Singapore, explain how these sanctions affect the US, the UK and the EU.

Apart from oil and gas, the western countries have also implemented financial measures against Russia. Some Russian banks are removed from the international financial messaging system, SWIFT, which is widely used by banks to transfer funds across countries. You may discuss with your economics tutor Singapore in your economics tuition Singapore class the significance of SWIFT in the international banking system. In addition. Assets of Russia’s central bank have been frozen.

There are also sanctions targeting wealthy and influential individuals in Russia, including Russian billionaires and 386 members of the Russian parliament, as well as restrictions on products sent to Russia. You may consult your economics tutor Singapore in economics tuition Singapore about the reasons for targeting wealthy and influential individuals in Russia. Meanwhile, more and more multinational corporations are pulling out of Russia. These include, among others, McDonald’s, Coco-Cola, Starbucks, and Heineken.

Impact Of Russian Sanctions On The Global Economy

Russian is one of the world’s biggest oil exporters, alongside Saudi Arabia. In 2020, its production reached 10.5 million barrels per day, about 11 per cent of global oil production. Its oil exports accounted for over 10 per cent of global exports, with a total value of around US$115 billion. The European countries are highly reliant on Russian oil exports. In 2020, about half of Russia’s oil exports were to European countries. In discussion with your economics tutor Singapore in your economics tuition Singapore class, explain how the European countries can minimise the impact from the reduction of Russian oil and gas imports.

Russia threatened to cut off gas supplies to European countries if an oil ban were to be imposed. Its Deputy Prime Minister Alexander Novak also warned that a ban of Russian oil would lead to “catastrophic consequences for the global market”. Experts commented that while the western countries could turn to Saudi Arabia and Kuwait for more oil supply, it is not easy to find alternatives to Russian gas. The sanctions on oil and gas from Russia could push up the energy prices significantly. You may approach your economics tutor Singapore in economics tuition Singapore for detailed explanation about the impact on consumers in Europe. Consumers in Europe will have to deal with rising energy and fuel bills.

The ongoing Russia-Ukraine war and the resulting sanctions have caused Russian stock markets to crash. Russian ruble has also plunged to record low. In a bid to stabilise the ruble, Russia has more than doubled its key interest rate. It is also blocking interest payments to foreign investors, banning Russian firms from paying overseas shareholders and stopping foreign investors from selling Russian stocks and bonds.

Linda Geng

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