Russia and Ukraine Crisis , What it means for business

Russia and Ukraine Crisis , What it means for business

Photo by UX Gun on Unsplash

As tens of thousands of Russian troops accumulated rapidly on Ukraine’s borders during the first month and a half of 2022 fueled fears of an invasion which has now been realized. Putin recognized two separatist Ukrainian regions as independent states on February 21, ordering Russian “peacekeeping troops” to deploy to both. Russia invaded Ukraine on February 24, 2014.

Even so, it is vital to be kept in mind that Moscow already invaded Ukraine in 2014, when it had taken over the country’s southern Crimea peninsula. It, all of a sudden backed pro-Russian rebels who seized large swaths of the country’s eastern Donbas region which they still control today. The fighting claimed the lives of approximately 14,000 people and the Ukrainian economy never fully recovered.

Where will Russia invade now?

Putin conceded the independence of two areas in eastern Ukraine on February 21, the self-proclaimed Luhansk People’s Republic and the Donetsk People’s Republic. As of February 24, the issue is how far will Russia go to attack Ukraine?

Nonetheless, the dispute threatens to cause catastrophic economic harm to some nations and industries, perhaps causing suffering for millions of people. Russia is the world’s third-largest producer of petroleum and a major natural gas exporter. Ukraine’s agriculture land feeds millions of people around the world. Furthermore, stock markets are in peril as central banks prepare to reverse years of easy-money policies and raise interest rates to battle inflation.

Thus far, analysis from experts that spoke to Investment Monitor before February 24 still offers insights, fellow at the Foreign Policy Research Institute.

Referring to Putin’s point of view, it is such a fantastic opportunity with the West being so divided Bender concurred. This is not about Nato, which, like Germany, is a European powerhouse. Russia is the region’s most powerful military force. Domestically, Putin has not done much for Russia’s economy outside of major cities like Moscow and St. Petersburg, so an invasion would be a big win for his narrative of reclaiming the country’s sphere of influence and global status as well as temporarily raising the price of oil to probably more than $100 per barrel (as of February 24), added Bender.

The February 21 quasi-invasion solidified the territory already under Putin’s authority replacing proxy forces in Donetsk and Luhansk with genuine Russian troops. From here, he may move on to the industrial coastal city of Mariupol which is close to Russia and not far from Donetsk being captured by pro-Russian separatists in 2014 and became the de facto capital of the Donetsk People’s Republic. Mariupol is home to two of Ukraine’s major steel plants, both of which are owned by tycoon Rinat Akhmetov, one of the country’s wealthiest industrialists.

How it is affecting Global Economy

A battle that accelerates inflation, scares markets and foreshadows catastrophe for everyone from European consumers to indebted Chinese developers and African households facing skyrocketing food costs is just what a weak global economy needs.

Russia’s war on Ukraine and the West’s retaliatory sanctions may not herald a new global slump. The combined GDP of the two nations is less than 2% of the global GDP. Many regional economies are still in good shape, having recovered quickly from the pandemic slump.

Foreign businessmen in Ukraine have already braced themselves for the worst. Even before the horrific events of February 24, Ukraine’s key sectors, particularly tourism, had been impacted by the fear of Russian invasion.

Throughout the start of 2022, there was a reduction in inbound and departing travel as European airlines such as Lufthansa, Austrian Airlines, and Swissair suspended flights with overnight stops in Kyiv’s Boryspil airport. Shapovalova made a remark.

Based on Investment Monitor’s interactions with numerous political risk consultancies (prior to February 21), it appears that many international enterprises, both in the tourist sector and elsewhere, are considering the potential consequences of invasion and developing contingency plans.

In times of global uncertainty, Moody’s Investors Service managing director Michael Taylor cautions that investors may flock to Treasuries and other ultra-safe assets, raising the relative credit costs for riskier enterprises.

“Chinese property developers would be particularly vulnerable to this risk,” Taylor added, as they seek to refinance substantial sums of foreign debt this year. Financial markets might become even more unstable if the US pursues what some refer to as the “nuclear option” of cutting Russia out of the SWIFT payment network, a messaging service that connects hundreds of institutions and allows them to move money around the world.

Such a measure would isolate Russia and prevent the transfer of revenues from energy production, which accounts for more than 40 percent of total revenue. However, excluding Russia from international financing might have the opposite effect, harming US and European industries who do business with Russian enterprises.

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