The Russia Ukraine conflict is bound to have grave repercussions for the global financial world. The Russian president has finally declared war on Ukraine. The Russian troops have entered Ukraine.
Given the current precarious state of the world economy, the world is definitely not in a position to bear another economic blow. As Central Banks across the world get ready to tighten their monetary policies the markets are definitely likely to act adversely to the invasion of Ukraine by Russia. Readout this article to know more about the Russian and Ukrainian economies and the impact of this invasion on the global financial world.
How Will This do Invasion Affect The Global Financial World?
Russia and Ukraine together contribute less than 2% of the total world GDP. However, this does not mean that this invasion would have no bearing on the state of the world economy. Russia is one of the largest exporters and producers of petroleum and natural gas. Ukraine is one of the largest exporters of edible and agricultural products to Africa. This conflict is likely to affect the supply of all these commodities.
The world is already facing a terrible shortage of energy supplies. The energy suppliers are still recovering from the economic impact of the coronavirus pandemic. Russia accounts for about 40% of the total natural gas exports to Europe. Any reduction in the supplies is likely to adversely affect the European economies and by extension the global supply chains.
The Dilemma of Sanctions
The Western world led by the United States of America is likely to face a dilemma of whether or not to impose sanctions on Russia. Imposing sanctions on Russia would adversely affect the economies cutting down on their energy supplies. This will affect the global financial world adversely.
However, not imposing sanctions on Russia may be construed as an act of cowardice. Entry into Ukraine may also give Russia a pathway into Europe that it may leverage later to threaten European nations.
Not imposing sanctions on Russia would also adversely affect the confidence of European Nations in each other. It remains to be seen how the Western world will find its way out of this crisis. But one thing is clear, the global financial world is bound to be shaken by this conflict.
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