Economic
Sanctions
Recently, Ukraine’s crisis is a hot
topic in the world; especially after the EU and U.S. put some economic
sanctions to Russia. The sanctions mostly focus on oil industry, defense industry
and financial companies like Russian banks. In details, major Russian banks
have the assets in EU and U.S. like Sberbank will meet restrictions on debt
maturities. They also blocked some assets for defense technology firms. Under
U.S. sanctions, Russia will have difficulties in oil exploration and production
of Arctic offshore. Moving to East side of Russia, China does not put any
sanctions and say that the problem should be solved in politically. Therefore,
China will keep a “friendly cooperation” with Russia and Ukraine. Will these
sanctions work? In my opinion, they will. These sanctions make a lot of effects
into Russian economic and put Putin in a difficult position. Now he has to face
with sanctions from EU and U.S. and also Russian citizens since there are too
many soldiers have died in battle. However, these sanctions are like double edged
swords. U.S. and EU making bans for Russia also mean that they are cutting
investing and trading with Russia. An example is the delay of exporting oil
from Russia to countries in Europe. It will strongly affect the U.S. and
European investors having assets in Russia companies. Since Russia is a big
country, it will make a lot of effects into world’s trade. For example, the
price of oil will be increase if the trading is ban and the consumption remains
the same. Putin will not let it happens. First, although Russia still has other
markets, U.S. and EU are ones of the biggest markets with high potential.
Second, Russia is much bigger than North Korea in terms of either trade or
land, so autarky is impossible for Russia. In conclusion, all these sanctions
are made to against Russia’s aggression, and Russia should really pay attention
if they do not want to lose both human and economy.
References:
I really like this post because this whole Russia situation has been a hot topic in my finance classes. I feel that if the U.S and EU oil sanctions do work, Putin may back off due to the negative impact it will have in the aggregate. However, Russia could fire back by cutting off natural gas to Europe. As for China, I completely agree with how they are approaching this situation. The only civil way to resolve this conflict is through a compromise between political leaders.
ReplyDeleteThroughout history, economic sanctions usually were implemented for politic goals, that would be impacts to both parties. Looking back to Ukraine crisis, EU will be undoubtedly in strike with loss of energy supply and assets in Russia. Simultaneously, under the sanctions, Russia government and Putin would be under tremendous politic pressure from a minority of politicians and Russians who supported rebels, the international society as well. As my opinion, the set of sanctions will lead to partial impacts in Russia rather than deeper influence that mentioned by several western press.
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ReplyDeleteI agree with the U.S. and Europe on the fact that they put sanctions on Russia due to the predicament in Ukraine. But in turn I also think that the U.S. and Europe should be very hesitant on how far they are willing to go with all of the sanctions. Russia provides 80% of the natural gasses for European countries, although it is very unlikely they would cut off trading the resource it is possible in time of utter chaos. Right now Putin might start to feel alarmed with EU efforts to expand eastward. In history when a nation's leader feels alarmed or is backed into a corner things don't tend to turn out too peacefully. They need to find a happy medium through compromise as John proposes.
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