The Effect of Sanctions on Russia
The Russian-Ukrainian war that started on February, 24, 2022 has had an enormous influence on the international economy and state economies of almost all countries around the globe. The sanctions against Russia that have followed after its invasion of Ukraine have also affected Russia’s economy and trade strategies. Some of the major measures taken by the US and other states include Russia’s disconnection from SWIFT, its loss of the Most Favored Nation status, the loss of its oil export to the US, and the ban from obtaining loans from the International Monetary Fund and the World Bank. Disconnecting Russian banks from the SWIFT system has allowed Russian financial institutions to be cut off from the international financial system, making them unable to perform operations in other countries.
In turn, the removal of Russia’s Most Favoured Nation status has allowed for increasing import tariffs, as well as imposing quotas and even banning certain Russian goods. It has also allowed Western allies to restrict services provided by Russia and overlook the country’s intellectual property rights (“Factbox: What revoking Russia’s ‘most favored nation’ status means,” 2022). However, the ban on Russia’s oil exports imposed by the US has arguably had a limited effect on Russia’s oil production, which is reported to have fallen “by less than 3% since the invasion of Ukraine” (Alvi, 2022, par. 12). Finally, the ban from obtaining loans from the International Monetary Fund and the World Bank was expected to cut the funds available to Moscow to finance the war. However, this is also complicated by the fact that energy prices are rising, providing significant revenues to Russian economy (RFI, 2022).
Implications for Russia’s Trading Partners
The sanctions imposed on Russia by the European Union and NATO have also influenced its trade partners and international trade in general. Exports to Russia from both sanctioning and nonsanctioning countries, such as China, have fallen significantly. The flow of goods and services has been impeded significantly, resulting in an increase of costs and a shortage of products such as wheat (Carbaugh, 2019). These dramatic food shortages currently observed around the world pose risks of global famine (Carbaugh, 2019). Moreover, sanctions imposed on the Russian economy and business sector have caused disruptions in the flow of electronics, parts supplies, energy resources, and raw materials. The increasing gas prices can lead to difficulties in the international transportation of goods. Considering the above-mentioned, it can be stated that Russia’s trade partners have to implement measures aimed at finding alternative sources of energy and food products.
Saudi Arabia and the Economic Crisis
The Kingdom of Saudi Arabia can implement measures that will address the problems involved in the economic crisis caused by the Russian invasion of Ukraine. First, the country could increase its oil production to supply global communities in the emerging crisis. This would alleviate the effects of the worldwide oil shortage and help to prevent further increases in oil prices. Being the largest oil exporter in the world, the Kingdom of Saudi Arabia can have an uncommon influence in navigating the new economic climate caused by the crisis. For instance, it could lead the Organization of the Petroleum Exporting Countries (OPEC) in the processes aimed to curb production in a way that reduces supply. In addition, this would enable other producers to remain relatively profitable in terms of investments.
References
Alvi, Z. M. (2022). Russia-Ukraine conflict: Sanctions and effects on the world. SSRN Electronic Journal. Web.
Factbox: What revoking Russia’s ‘most favoured nation’ status means. (2022). Reuters. Web.
Carbaugh, R. (2019). International economics (17th ed.). Cengage.
RFI. (2022). Russia doing better than expected despite sanctions: IMF. Web.