The Potential Effects of Russia’s Decision to Invade Ukraine on the Global Economy

Micah Shin, Senior Correspondent, U.S.A

12.00am, 20 February 2022

Member of the Ukrainian State Border Guard Service patrols the area near the frontier with Russia in the Chernihiv region, Ukraine February 16, 2022. REUTERS/Valentyn Ogirenko

For Ukraine, North Atlantic Treaty Organization (NATO) membership remains a top priority. NATO utilizes political and military means to guarantee the freedom and security of its members. Recent news has highlighted Russia’s plan to invade Ukraine because of this decision. There are multiple events that have factored into this invasion. For one, Russia’s illegal annexation of Crimea prompted NATO’s unanimous decision to suspend practical cooperation with the Russian Federation in 2014. In addition, the president of Russia, Vladimir Putin, wants to rebuild a Russian sphere of influence in Eastern Europe. He seeks to accomplish this goal by embracing former Soviet Republics that are now independent countries: Belarus, Estonia, Georgia, Latvia, Lithuania, and Ukraine. Putin considers Ukraine to be an important part of historical Russia, and the loss of the country as a symbol of Russia’s defeat in the Cold War.

Although this geopolitical turmoil is centralized in the European continent, the implications of the Ukraine-Russia border crisis affects the entire world—including the economy and global markets. This year, the markets have been especially volatile due to apprehension of higher inflation and tightening by the Federal Reserve. National security advisor Jake Sullivan announced that an invasion could happen at any time in the coming days. The stock market quickly reacted to this news, and a sell-off was triggered last Friday. Energy prices are expected to surge in the event of an invasion, predicted to surpass the $100-a-barrel threshold for the first time in nearly seven years. In this border crisis, China continues to support Russia in its response against Ukraine’s decision to join NATO, while the United States supports Ukraine.

The alliances formed by China and Russia, and Ukraine with Western countries, has undoubtedly increased tension between allies on opposing sides of the conflict. A strained relationship between China and the United States would lead to unfavourable consequences. To date, China remains the largest exporter to the U.S. In 2021 alone, the U.S. imported over $500 billion worth of goods from China. In the event of a speculated trade war between China and the U.S., import restrictions will be placed and tariffs will be raised.