Vladimir Putin Announces Russia’s Invasion Of Ukraine
As probably most (or all) of our readers have already heard, Russia has launched a full-scale invasion of Ukraine. At 6 am in Moscow today, Russian President Vladimir Putin signaled Ukraine’s invasion with a chilling speech citing Ukrainian aggression toward Russian citizens (these allegations are not confirmed) as the country’s primary reason for invading. Putin’s speech also indirectly addressed the west, as Putin commented that any country who attempts to prevent Russia’s invasion of Ukraine will experience “consequences greater than any you have faced in history.”
Russian Troops Enter Ukraine
After Putin’s speech, Russian troops poured into Ukraine from the country’s northern, eastern, and southern borders. Ukraine’s president, Volodymyr Zelensky, called Russia’s invasion “villainous” and said “From today our states are on different sides of world history. The Russian state is on the path of evil.” Similarly, President Joe Biden declared “Putin is the aggressor. Putin chose this war, and now he and his country will bear the consequences.”
As Russia seeks to “demilitarize” Ukraine, explosions, missiles, and combat are prevalent throughout the country — Zelensky told Ukraine’s citizens: “We are defending our freedom. Be ready to support your state on the squares of your cities.” Russia is specifically targeting the country’s critical infrastructure, like its airports, with missiles to destabilize Ukraine’s defensive efforts. Chernobyl, the abandoned nuclear power plant from the Soviet Union, has also been seized by Russian forces… according to Ukraine’s leader, Chernobyl’s seizure is an aggressive and dangerous act which may be “a declaration of war against the whole of Europe.” Chernobyl’s nuclear disaster, which occurred 36 years ago, is still leaking radioactive materials and, if disturbed, could wreak havoc across Europe.
The U.S. And Allies Respond
The U.S. and its allies, like the EU, have responded to Russia with additional harsh economic sanctions. Earlier this week, Germany shut off access to the Nord Stream 2 natural gas pipeline to demonstrate its opposition to a Ukrainian invasion. Today, President Joe Biden announced that Russia’s largest financial institutions (such as Sberbank, VTB, and their subsidiaries) will have no access to any U.S. financial infrastructure. The U.S. also disclosed a variety of new debt/equity restrictions on Russian businesses and institutions, further sanctions on wealthy Russian elites, economic sanctions against Belarus for assisting Russia in its invasion of Ukraine, and additional restrictions impeding Putin’s military and strategy operations.
Unfortunately, economic sanctions did not deter Russia’s initial invasion of Ukraine, and U.S. officials remain doubtful that additional sanctions will be successful.
The Dire Economic Consequences Of This Situation
Russia’s invasion of Ukraine will be felt across the globe. We’ve covered the possible economic consequences of a Russian invasion before, but here’s another list for your convenience: 💡
- Oil. Although Russia is not a member of OPEC, the country is a major exporter of oil. Specifically, Russia exports billions of dollars worth of crude petroleum, refined petroleum, and petroleum gas every year. Once Russia’s petroleum exportation is disrupted, it could cause crude prices (which already reached their highest levels since 2014 this week) to reach $120 or $150 per barrel, according to JPMorgan. This would be bad for the already-chaotic international oil supply, it could increase U.S. gas prices, and contribute to more inflation.
- Inflation. According to CNN, analysts estimate that an increase in oil prices above $110/barrel would result in a +10% YoY increase in inflation. This inflation would not just affect energy and oil — it would affect consumer goods and the rest of the U.S. economy, too.
- Fertilizer. Russia is the world’s biggest exporter of nitrogenous fertilizer, which is used to fertilize crops. Currently, both the U.S. and Europe import Russian fertilizer, which could have negative consequences on North America’s growing season. It’s still unknown the extent to which Russian sanctions could affect U.S. agriculture, but yesterday Bloomberg published: “It’s a very real possibility we see shortages for this coming year especially heading into the North American growing season.” This could mean crop shortages and higher food prices.
- The Economy. Increased oil prices will negatively impact the post-pandemic recovering U.S. GDP. If inflation reaches 10%, the Fed may have to hike rates even more aggressively to combat inflation, and we all know how investors feel about rate hikes (hint: not good.) Rate hikes would significantly increase the cost of borrowing, like for mortgages or car loans, for all Americans. Finally, the markets don’t like geopolitical conflict — although the market closed green today (miraculously?), tensions of Russia-Ukraine magnitude could likely result in widespread selloffs in the near future.
- Taiwan. The situation in Ukraine could be a green light to China signaling a Chinese invasion of Taiwan, which could be catastrophic for the already-struggling global semiconductor supply. On Putin’s invasion announcement, China began exhibiting increased aggression towards Taiwan, saying Taiwan is “not Ukraine” and is an “inalienable part of China.” In 2020-2021, Taiwan accounted for over 60% of the global semiconductor market, and semiconductors are used in the production of cell phones, cars, medical devices, and pretty much… all tech.
- Energy in the EU. Europe is dependent on Russia for natural gas. Germany announced that it would shut off the Nord Stream 2 natural gas pipeline in response to Russian aggression towards Ukraine, and now energy prices in the EU are climbing out of control — today, Dutch TTF gas futures surged 60% (prices not seen since 2005) and German power contracts exploded 42%.
We will continue reporting on the social, political, and economic consequences of Russia’s invasion of Ukraine. In the meantime, though, stay safe ya’ll. 🙏 Support one another. ❤️ 🇺🇸