Risking Global Recession

Sanctions on Russia will cause a global economic meltdown

Financial analysts are predicting that if Russia is hit with sanctions and is cut off from the SWIFT payment system there is the risk of a major global recession.

According to the Dutch banking giant ING, thus is due to Russia’s dominance in the essential commodities market. Its is a major supplier to world markets of such commodities like gas, crude oil, metals and wheat. Financial markets are betting on a Russian invasion with no sanctions. Even at that there will be disruption to Russian gas supplies transiting through Ukraine to European markets and the export of Ukrainian wheat and corn.

But in the event that there are sanctions and SWIFT disconnection. It will be very hard for Europe to get cheap gas supplies. The Nord Stream 2 is yet to be operational and coupled with the high energy cost currently there will be a financial earthquake.

Russian crude oil will affect the markets. Oil is currently trading at $90 for the first time in eight years and Russia being the largest oil exporter after Saudi Arabia holds leverage. The main beneficiary will be China who will welcome the increased oil flow to her markets. An aluminium deficit will impact the world. In 2018 Russia shook the aluminium market and European smelters are already reeling from the current energy crisis. Costs of other precious metal like nickel will skyrocket.

Bread. Moscow is a major wheat exporter accounting for 20% of the global wheat trade with Turkey and Egypt being the major buyers of cheap Russian wheat. Cutting Russia off will lead to high prices in Egypt and Turkey and has the potential to cause social unrest which could destabilise the entire Middle East.

Source ING

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