How Sanctions Affect Russia
Russia’s invasion of Ukraine started on 24 February 2022 and since then, global sanctions have been placed upon Russia. These sanctions have included freezing Russia’s central bank’s assets, banning Russian energy imports, and freezing the assets of high-level Russian officials. As a result, the list of companies leaving Russia has risen dramatically. Global legal firms, financial institutions, retailers, and more have left in their droves.
Below, we explore what this will mean in the long run assuming sanctions stay in place.
Companies and Organisations that Have Left Russia
The sanctions placed on Russia have not only had a financial impact, but they’ve also made it difficult for businesses to trade in Russia. It’s damaging for a company’s reputation to still be trading in Russia. As such, many global businesses have left the country. Almost 1000 businesses have left Russia, including Adidas, McDonalds, Airbus, Mercedes Benz, UEFA, Uber, Microsoft and Spotify.
How have sanctions affected Russia so far?
On a macro scale, the sanctions have damaged Russia’s economy, although it hasn’t collapsed. Indeed, inflation is set to rise to 23 per cent this year and Russia is expecting to face a deep recession.
For the average person in Russia, there have been several impacts. Essentials such as food and medication have become much more expensive for the consumer, despite not running out.
However, technology such as iPhones and Apple accessories are no longer in stock, and the price of laptops and new cars has risen significantly. Ultimately, although Russia’s economy hasn’t collapsed, life has become more insular and expensive for Russian citizens.
What Would This Mean for the World Economy in the Long Run?
Meanwhile, the world economy will also suffer from the sanctions placed upon Russia. Although Russia has a modestly sized economy, it controls vast quantities of many crucial commodities that are wanted across the globe. For instance, Russia is one of the largest producers of oil and gas in Europe. In the week following the start of the war, the global prices of oil and natural gas rose sharply, especially gas in Europe as supply dwindled and demand rose.
The knock-on effect of this is that many countries – especially European nations – will suffer from prolonged periods of inflation. When coupled with rising energy prices for consumers, the average person across Europe will find that their cost of living rises substantially.
This could worsen if supply chains are further damaged by sanctions and the invasion of Ukraine. The sanctions placed on Russia have damaged the country and the global economy. Although they’re important for deterring and limiting Russia’s military plans, the average global consumer will notice the impact too.