October 21, 2014 6:38 pm

Sanctions: How the Crisis In the Ukraine Could Affect Global Finance

Russia’s recent incursion into the Crimea province of the Ukraine has pushed the limits of tolerance of many governments around the world. Leaders of several different countries have either already instituted harsh sanctions on various members of Putin’s elite, or are poised to do so. Not since the close of the Cold War have we seen this level of animosity between Russia and the United States.

The question is, how will these sanctions, both those placed by us and those Russia have imposed, impact the global economy? Given that the world is still reeling from the financial crisis that gripped us in 2008, this question is extremely important. Now that we have just started to regain our financial footing, taking more damage in the form of sanctions could be catastrophic.


What Sanctions Are Currently In Place? 

Thankfully, the current sanctions volleys passing between the United States, the EU and Russia are relatively low impact. Several of Putin’s closest advisers have been targeted by the USA and the EU, including Chief of Staff, Sergei B. Ivanov, and Putin’s personal banker, Yuri V. Kovalchuk. The door remains open, however, for more sweeping penalties throughout Russia’s economic landscape.

Russia’s response has been to impose similar restrictions and sanctions on prominent USA businesspeople. Targets of these sanctions include Majority Leader Harry Reid and Speaker of the House John Boehner.


How Could Sanctions Impact Global Finance? 

While stock prices have fluctuated due to the crisis in the Ukraine, this first round of sanctions from both sides has not disrupted the global economy in any significant way. This is primarily due to the fact that they are, for the most part, symbolic and target individual people, as opposed to whole businesses. This has allowed for their efficacy to be greatly muted and no threat to any one country’s economy.

However, if things progress down to something a little more serious, we could start to see more of an impact take place. For example, if we were to revoke favorable tariff rates currently held by Russia, prices for goods could go up, placing an undue amount of stress on the average Russian citizen.


Matters get even more hairy when you bring the EU into play. The EU is dependent on Russia for a large portion of their oil and natural gas supply. If sanctions push Russia to the point where they disrupt or increase the price of these supplies, the EU could suffer a catastrophe.


While current sanctions are well within the global economy’s ability to handle, if this crisis does not resolve itself soon, we could see a much larger impact the world over. Should the US impose tougher sanctions, regardless of the possibility of a heightened Russian response? Let us know what you think in the comments section below.