Saturday, November 26

The economic sanctions on Russia that no one dares to mention

Although, for now, the focus is on the extent to which the crisis between Ukraine and Russia can lead to a war, where there would be more involved, not the consequences it would have on an economic level can be ignored.

The informative special made by, ‘Origins and consequences of the Ukraine crisis’, details them in full.

To begin with, the European Union could put sanctions, but those that were already approved in 2018 did nothing but make aluminum more expensive. José María Paredo, professor of international relations at the European University, warns that there is a lot of talk about sanctions, but they are not yet “explicit”. True, there is some speculation.

Paredo believes that the reason why they have not been made public is to “not destabilize the economy itself.” The professor goes on to recall that “we live in a very open and highly dependent economy in such a way that it is affected globally on many occasions and is altered by events, report publications or public statements.”

Just because the tension is prolonged, it would already have some derivatives. For this reason, Paredo believes that it would be a sufficient reason for the powers involved to seek a way to resolve the conflict.

Russian oil reduction

And, on the other hand, the energy issue is at stake. If the conflict occurs, Russian oil production would be affected by 2.3 million barrels per day, which would have a negative impact on the price of oil.

Precisely, Javier de la Nava, a professor at Udima, warns that, if oil reaches 150 dollars, a level that JP Morgan analysts do not rule out, inflation could reach 7.2 percent in the United States. “This is the same as an economic recession”, sentence de la Nava.

And what would happen in Europe? We should forget that transitoriness of inflation that “we have been saying,” says de la Nava.

Where could the sanctions go?

The first group of sanctions could affect the energy sector, especially in the start-up of the underwater gas pipeline that aims to supply gas to central Europe and that is paralyzed.

This stoppage caused a rise in gas prices and forced Europe to negotiate an increase in production with its partners. Thanks to this, the prices of natural gas in the European Union moderated to 90 euros per megawatt-hour, falling from a maximum of more than two weeks of 93.58 euros reached in the last session, which adds to the expectations of lower demand for heating.

A second sanction would be linked to the exclusion of Russia from the system of bank transfers, “which would mean a destabilization of the price of the ruble,” says de la Nava. In other words, it could lead to a devaluation that “could be impressive”.

Finally, there would be the impossibility of importing into Russia those products that contain American technology.

Both teachers emphasize that you cannot be calm, despite being more or less far from the conflict zone. “The best thing is that it doesn’t happen,” insists de la Nava.

To conclude, Paredo points out the geoeconomic importance of the gas pipeline. The conflict has made it clear that Europe needs an alternative energy supply that does not depend on third parties, at “a time when many companies are recentralizing these factories.” But the message that is being sent, says de la Nava, is “that perhaps protectionism is not so bad.” Something that in the long term can be harmful.