This week, and not surprisingly, economic news was marked by a topic that hit the world hard and caused a lot of ink (and tears) to flow: the Ukraine-Russia war. A retrospective view of European Union sanctions and its impact on the Russian and global economy.
Russia’s invasion of Ukraine marks a deadly moment in human history. This event will have a very serious impact on the world economy, which has just come out of the coronavirus outbreak. Financial markets have really collapsed and oil prices have risen. Countries were forced to spend astronomical sums to bail out their economies.
The war that began between Russia and Ukraine can even be compared to the Yom Kippur war of 1973 in the Middle East, which had major consequences on oil prices and on the health of the global economy. And for good reason, Russia is the second largest exporter of crude oil in the world. the price of oil has jumped. Investors are now worried about disruptions in oil supplies. The price of a barrel of Brent from the North Sea rose beyond 102.75 dollars. The political and human consequences of Russia’s attack are deadly, which means the world must prepare for a serious economic impact.
1- Exclusion of Russia from the SWIFT banking network
A large number of banks in Russia will not be included in the SWIFT interbank network. However, the EU has been careful to bail out two financial institutions linked to the hydrocarbon sector, including that used by gas giant Gazprom. This is explained by the reliance of European states on Russian gas, in particular Germany, which fears that it will no longer be supplied. This measure is intended to punish the Russian economy and torment Moscow “costs that will further isolate it from the international financial system and our economies.”
The measures against Russia will take effect on Saturday 12 March, after the publication of the decision in the Official Journal of the EU. The banks in Russia affected by this decision are: VTB Bank PJSC, Bank Rossiya, Bank Otkritie, Novikombank, Promsvyazbank PJSC, Sovcombank PJSC and VEB.RF. These establishments “is the first concerned with funding Moscow’s war effort with Ukraine”, detailed a European official, pointing out that a quarter of the volume of Russia’s banking system is targeted by the proposal. Despite heavy international sanctions, Vladimir Putin has no intention of ending his “military operation” until his goals are achieved.
Also read: War in Ukraine: What about exchange students in Russia?
2- Switzerland emerges from its neutrality and sanctions on Russia
Switzerland takes all the economic sanctions imposed by the EU on Russia. “This is a major step for Switzerland”, said on Monday, February 28, the President of the Swiss Confederation, Ignazio Cassis, at a press briefing. He claims: ” the Federal Council took this step with conviction, caution and without hesitation ”. Not only that, the assets of personalities on the EU blacklist are ” frozen with immediate effect “, as announced by the Minister of Finance.
However, the Swiss authorities were reluctant before applying these sanctions against Russia. The EU and the United States did not hesitate to put strong pressure on them to act quickly. The majority of political parties, apart from the radical right-wing party UDC, of which the Swiss finance minister is a member, have demanded stricter sanctions. In addition, more than 10,000 people marched on Saturday to support the Ukrainian people and demand a radical position and the implementation of strong actions.
Also read: The average salary in Switzerland in 2021
3- The ruble in freefall and the Moscow Stock Exchange closed
Following the sanctions imposed by the international community on Russia, the ruble (Russian currency) has crashed in the markets. On February 27, the day before the war started, the dollar was trading at 83.5 at the last official rate. The euro is worth 93.5 rubles. On Thursday, March 2, the dollar was trading at 106.90 rubles, the euro at 118.48RUB, while on Monday, February 28, at noon, the dollar was trading at 100 rubles and the euro at 109.4RUB.
To slow the collapse of the Russian currency, a ceiling was set at regular intervals to stop trading. In addition, the Central Bank raised its key rate from 9.5 to 20% on Monday morning and decided not to open the Moscow Stock Exchange on Monday, for fear of witnessing the collapse of Russian securities. “The uncertainty is overwhelming,” underlined Alexeï Vedev, analyst of the economic institute Gaïdar.
Also read: The average salary in Russia in 2022.
4- The collapse of stocks and the collapse of the financial market
It was only hours before Wall Street was in the red. Futures on major New York indices indicate an opening of 0.71% for the Dow Jones, 0.87% for the Standard & Poor’s 500 and 0.94% for the Nasdaq. European stock markets are also posting losses. In Paris, CAC 40 lost 3.27% to 6,441.32 points. In London, the FTSE 100 lost 1.15% and in Frankfurt, the Dax fell 2.83%, as reported by the Boursorama site.
Central banks have injected large amounts of money into the financial markets in recent years to support and stabilize their economies. However, with the spread of the pandemic, parts have already collapsed. Central banks will no longer be able to inject money if they do not want to see the level of stagflation worsen and witness the company’s earnings slow, a phenomenon that will drive down share prices. It can also result in reduced investment, which will increase the level of unemployment.
Also read: ESCP launched ESCP4U, a program for Ukrainian refugees.
5- The end of the Russian media, RT and Sputnik
The President of the European Commission, Ursula von der Leyen made a big announcement on Sunday 27 February: the closure of RT and Sputnik. Which means the two Russian state media are blocked within the European Union. He justifies his choice: they do not will be more able to spread their lies to justify Putin’s war and sow chaos in our Union. »
Tech behemoths like Meta, ByteDance, Google, Microsoft and even Telegram have also taken radical decisions against these two media. Nick Clegg, VP of Meta’s Global Affairs, said, “ we restrict access to RT and Sputnik across the EU for now “. He explained this decision by requests from some governments and the EU “.
Twitter, meanwhile, promises faster action against the growing fake news about the Russian invasion and the removal of accounts sharing Russian troop movements.
We have received requests from several Governments and the EU to take further measures in relation to Russian state -controlled media. Due to the peculiar nature of the current situation, we will restrict access to RT and Sputnik across the EU for now.
—Nick Clegg (@nickclegg) Feb. 28, 2022
Also read: Twitter stock dropped after Donald Trump was banned from the social network