How Russian Sanctions Continue to Affect the Worldwide Economy

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Sanctions are a non-military option used to influence global events by either penalizing or disincentivizing a country’s actions.  In this case, the United States and allied nations enacted sanctions to penalize and slow down Russia’s invasion into Ukraine.  The United States, European Commission, France, Germany, Italy, the United Kingdom, and Canada removed Russian banks from SWIFT, a system used by banks for cross-border payments.  Additionally, those countries have frozen Russian foreign reserves in their jurisdictions, a reported amount of $630 billion.  

The United States took further steps to restrict financial dealings with Russia, including banning certain imports and exports and restricting Russia’s largest bank (Sberbank) from  most transactions involving U.S. dollars.  Many companies based in the U.S. also chose to halt all operations in Russia.  These sanctions are particularly impactful due to the importance of the U.S. dollar in international trade.  

While it is clear that Russia’s economy is struggling as a result of these sanctions, their impact can still be felt on a global scale.  Russia used to be the second largest producer of crude oil, but sanctions have cut those trade ties with the rest of the world, skyrocketing the price of gasoline internationally.  In the United States, gas prices reached an all-time high of an average $4.42 per gallon on May 12.  
Russia has taken steps to boost their own economy, raising interest rates and trying to cut off use of the United States dollar, but these fixes are only temporary.  As sanctions continue, the international stock market struggles and prices of domestic goods continue to climb.  Experts predict that the Russian economy will shrink up to 15% by 2022, so the question that remains is just how long sanctions will stay in place, damaging both Russia’s economy along with the world’s.

financial war