As Russia prepares to make Crimea part of Russia, other countries have watched from afar and have developed plans to impose economic sanctions on Russia. Government officials from the United States have already signed an order enabling economic sanctions against sectors of the Russian economy. Leaders from the European Union are also considering their options as they meet in Brussels to discuss economic sanctions against Russia. With economic sanctions on Russia looming, the impact on Russia and the global economy remains to be seen.
First of all, Russia will be dramatically affected by these sanctions as Russia is very dependent on the European economy. Over half of Russia’s budget comes from gas and oil it sends to European Union member countries, making Russia extremely vulnerable to sanctions involving energy exports. Only 25 percent of European Union gas comes from Russia, meaning the European Union is less vulnerable to supply fluctuations from Russia due to potential economic sanctions.
Financial markets and global businesses in Russia may also be affected by these economic sanctions. European and American investors have become alarmed of potential retaliations from Russian officials. The Russian government has discussed the possibility of allowing property and assets of international businesses in Russia to be seized in the event of economic sanctions. Russian shares in the financial markets have decreased in value as a result of this possible retaliation from Russia.
Economic sanctions against Russia can have a larger impact than anticipated, due to the composition of the global economy. In today’s globalized world, economies are interconnected and events in one region of the world have impacts that create ripple effects around the world. Although the European Union and the United States are eager to pursue diplomacy to avoid these harmful side-effects, some economic sanctions have already taken effect. These sanctions may cause the Russian economy to contract. However, due to the intertwining of today’s globalized economies, these sanctions may also have serious implications for Europe and perhaps the rest of the world.