Beyond the pump: Record gas prices are pushing up everyday costs, dampening economic recovery
With the recent invasion of Ukraine by Russia many of the NATO members, including the United States have decided to support Ukraine through economic sanctions to avoid any physical implications as much as possible. tithe United States targeted the Russian central bank, mostly through freezing their assets. This caused the ruble to drop 30% relative to the United States dollar. In an effort to mitigate the damage of these sanctions the Russian central bank doubles interest rate to bring in more investment. Russia has a $640 billion stock pile of cash and at least half of that was frozen. This is causing a lot of unrest in the Russian public leading everyone to try to withdraw their money all at once which could have even worse impacts on the economy in Russia. One of the major implications is the price of imports in Russia is soaring which will lower the standard of living. Russia has been preparing for instances such as this by making a lot of their food production domestic, but the farmers that produce this food most likely won’t be able to get new equipment or fix old equipment which could make the measures taken by Russia virtually useless. China could offer support to Russia by letting Russia sell all of their exports to them but they haven’t done so showing that maybe the alliance isn’t very strong.
During the last week, Visa and Mastercard suspended operations in Russia over Ukraine invasion. The move by the payments firms could mean more disruption for Russians who are bracing for an uncertain future of spiraling inflation.
ReplyDeleteChina's response to Russia's actions will be very interesting. On one hand if they stick to their historic alliance, helping Russia despite their actions against Ukraine would not bode well for Chinese relations with the west/NATO, which might impact their trade, as Russia comes in as their 12th biggest trade partner. On the other hand if China condemns Russia and keeps refusing to help them they would lose one of their most historic allies, but would preserve almost all of their most important trade partners.
ReplyDeleteEven though Russia increase their interest rates to bring in investment, this is not really lucrative for the foreign investors given the political situation and increasing sanctions on Russia. It will be interesting to see Russian economy's effects on US and the world economy.
ReplyDeleteI found it interesting that you also mentioned China's role in stepping into the crisis-I wonder how this will affect Chinese and American economic relations.
ReplyDeleteJust like you said, Russia can not keep their food production domestic. It will be interesting to see what Russia's long run solution will be if this war keeps going.
ReplyDeleteI also am curious to see what happens with U.S. gas prices as we are refusing to buy Russian oil in protest against this war. I wouldn't be surprised in some areas like California if gas prices hit near $9-$10. The ironic thing is that we could not have this big of an oil problem if it weren't for our fiscal policies that have been implemented over the past year (example: Keystone Pipeline closing).
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