The Economic Impact of the Ukrainian Invasion

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Abstract

/h1><p id="49e4">Let’s look at the economic impact. After the declaration of war, Russia’s biggest company Gazprom crashed 52% intraday. Other companies like Novatek, Rosneft, and Lukoil crashed 30 to 40%. Due to Putin’s decision, 2 decades of economic progress have been lost.</p><p id="6576">The Ruble crashed 20% to an all-time low. Russia recently proclamated a law that forces Russian companies which receive money in other currencies to convert 80% into Rubles. This is an effort to strengthen its currency.</p><p id="8b32">According to Allianz, Russians have withdrawn 12% of their money from their bank accounts in the last 4 days. In response, the Russian central bank raised interest rates from 9,5% to 20% to make it more attractive to hold your money in your bank account, slowing inflation down. For comparison in the US, interest rates are at 0,08%.</p><p id="8652">The sanctions from the rest of the world have impacted Russia heavily and its oligarchs. Wealthy Russian billionaires can’t dock their superyachts and their bank accounts have been frozen. Russia has been excluded from the system to transfer money internationally called SWIFT.</p><p id="48a0">The Russian war reserve of $630 billion has been frozen. They can still access their gold and Yuans but the impact is significant.</p><h1 id="13e2">The

Options

world</h1><p id="3a0a">After external pressure, Apple, Samsung, Tiktok, FedEx, and Coca-Cola have cut their ties with Russia.</p><p id="2df9">BP has announced that it would sell its 20% stake, worth $25 billion in the state-controlled Rosneft. Shell declared that it will cut ties with Russia’s largest company Gazprom.</p><p id="0bfd">Today the 7th of March, Brent oil has surged to 140$ per barrel. In comparison, on the 1st of January, Brent was trading for 80 $per barrel. Many believe that this is a sign of a recession because, in 2008, brent hit 140$ per barrel. Gold has surged to an all-time high.</p><h1 id="b846">Future Outlook</h1><p id="2c48">It is likely that the volatility in the stock market and the economy will cease after the invasion is completed or stopped. Oil and gold will probably correct to more stable prices.</p><p id="85fa">The invasion of Ukraine will influence macroeconomics. When inflation began to rise in February of 2021, the FED didn’t raise interest rates because they believed inflation would slow down when the supply chain bottlenecks would resolve. It is possible that the FED might say that inflation has only risen because of the oil price increase and not the core inflation. This would also mean slower rate hikes which the market will definitely appreciate.</p></article></body>

Why?

Let’s first start by asking why Putin decided to invade Ukraine. In his video directed to the world, he cited his reasonings. He affirmed that Ukraine was created by the Soviet-Union 100 years ago. According to him, Europe and the US have allegedly installed neo-Nazi thugs so that Ukraine would join NATO. The west will take over Russia just like the Germans did in 1941. By conquering Ukraine, Russia will be ready for a future invasion.

His second argument is that Ukraine is being kept hostage by American-backed, anti-Russian neo-Nazis. This is quite surprising because the Ukrainian president Zelensky is actually Jewish and lost his 3 brothers in the holocaust. By invading Ukraine, Putin wants to “liberate” the Ukrainians and they will welcome him with open arms, which is definitely not happening.

Russia

Let’s look at the economic impact. After the declaration of war, Russia’s biggest company Gazprom crashed 52% intraday. Other companies like Novatek, Rosneft, and Lukoil crashed 30 to 40%. Due to Putin’s decision, 2 decades of economic progress have been lost.

The Ruble crashed 20% to an all-time low. Russia recently proclamated a law that forces Russian companies which receive money in other currencies to convert 80% into Rubles. This is an effort to strengthen its currency.

According to Allianz, Russians have withdrawn 12% of their money from their bank accounts in the last 4 days. In response, the Russian central bank raised interest rates from 9,5% to 20% to make it more attractive to hold your money in your bank account, slowing inflation down. For comparison in the US, interest rates are at 0,08%.

The sanctions from the rest of the world have impacted Russia heavily and its oligarchs. Wealthy Russian billionaires can’t dock their superyachts and their bank accounts have been frozen. Russia has been excluded from the system to transfer money internationally called SWIFT.

The Russian war reserve of $630 billion has been frozen. They can still access their gold and Yuans but the impact is significant.

The world

After external pressure, Apple, Samsung, Tiktok, FedEx, and Coca-Cola have cut their ties with Russia.

BP has announced that it would sell its 20% stake, worth $25 billion in the state-controlled Rosneft. Shell declared that it will cut ties with Russia’s largest company Gazprom.

Today the 7th of March, Brent oil has surged to 140$ per barrel. In comparison, on the 1st of January, Brent was trading for 80$ per barrel. Many believe that this is a sign of a recession because, in 2008, brent hit 140$ per barrel. Gold has surged to an all-time high.

Future Outlook

It is likely that the volatility in the stock market and the economy will cease after the invasion is completed or stopped. Oil and gold will probably correct to more stable prices.

The invasion of Ukraine will influence macroeconomics. When inflation began to rise in February of 2021, the FED didn’t raise interest rates because they believed inflation would slow down when the supply chain bottlenecks would resolve. It is possible that the FED might say that inflation has only risen because of the oil price increase and not the core inflation. This would also mean slower rate hikes which the market will definitely appreciate.