The consequences of invasion on economic are quite significant.
Given the terrible backdrop of battling near Chernobyl, it may seem ludicrous. It does, however, matter, and it might very well herald a 1970s-style energy crisis. It will be felt in homes across the country as well as across the continent.
The economic theater is equally critical to the outcome of this battle.
A combination of crude oil prices above $100 and wholesale gas prices around £3 per therm would result in an inflation peak of 8% or more, and, more significantly, a lengthier period of very high inflation.
As a result of the current increase in the average market gas price, crippling increases in family energy bills are already occurring. It’s now climbing even higher. Average bills may climb by the same amount as they are currently. Some industry analysts believe that by the autumn, average yearly expenses might be as high as £3,000 per year.
Flow Of Euros
There was no actual disruption in deliveries from Gazprom through Ukraine when the market crashed yesterday.
Russia will not face an energy export embargo in response to its attack, as Saddam Hussein did after Iraq invaded Kuwait in 1990. Russian gas exports to Europe are, in fact, higher in certain ways. Even while those countries condemn what President Putin is doing with that money, the flow of euros from Western Europe to the Kremlin for its main export will continue.
The markets are punishing Russia. Its sovereign debt is being scorned, its stock market is collapsing, and its currency has plummeted to new lows. To support the rouble, the Russian Central Bank has used some of its $630 billion war chest of currency and gold reserves.
Is there any economic involvement that could influence the outcome of this battle or the thinking of Kremlin officials?
The solution is to throw Russia into complete economic disaster, causing a shift in its political situation and a reconsideration of the invasion’s wisdom in Moscow.
A quick rebuttal
Economic weapons can escalate, like every other weapon in a battle.
Western countries might cut Russia’s financial system off from the Swift banking communications network, severely isolating the country.
However, President Putin can physically restrict energy supply to the West, driving up energy prices and shutting down European factories. Even though this would have long-term implications for his whole economic agenda.
This might drag on for a long time, plunging most of Europe into a deep recession. The ramifications for diplomacy, politics, and lives are already alarming. However, the economic consequences are severe.