What Do Russian Sanctions Mean to Your Startup?

After the Russian invasion of Ukraine, the US took to financial sanctions to cripple the Russian economy. This was done in hopes that it would force Russia to end the war. The fact of the matter is that global trade largely takes place with the use of USD. Therefore, this gives the US the power necessary to enforce sanctions and hit other countries where it really hurts.

How the Financial Sanctions are Playing Out

When the US began its financial war against Russia, other countries and entities followed suit. The European Commission, the UK, Germany, France, Italy, and Canada all took quick action as well. They, with the US, all removed Russian banks from SWIFT, which allows for cross-border payments all over the globe. Some Russian banks were still able to use SWIFT for exporting oil and natural gas. Thousands of banks were shut down due to these sanctions.

When these countries also froze foreign reserves, Russia was banned from doing business with USD. The exception being in energy, however the Russian energy sector is under attack as well. The US is no longer dealing with Russian oil and natural gas imports. Additionally, the UK is working quickly to ban these imports as well. These actions could damage the Russian economy significantly with an economic contraction of at least 20% just within this year.

Corporations are Also Joining the Fray

As the US government has doled out these unprecedented sanctions, US companies have taken their cue to do the same. Coca-Cola, Disney, Netflix, Papa Johns, McDonalds, and others have all halted their Russian business operations. Companies who attempt to continue doing business across the Russian border are unable to either send or receive currency.

What makes all these sanctions different from those in the past is that they are built and intended to affect the entire Russian economy, whereas past sanctions were focused solely on the Kremlin.

It may seem like Russia is taking the intended hit from sanctions and the US and other countries are succeeding in blocking them from the global economy, however this is far from the reality of the situation.

Russia has its hands deep in the pockets of the global economy. Countries across the globe have relied heavily on Russia for things such as oil and natural gas. Not only that, but Ukraine supplies much of the world’s wheat. This means the rest of the world is seeing hikes in prices of bread, grains, beer, and other everyday items.

While sanctions are intended to damage Russia’s economy, here in the US we are taking the hit as well with record high gas prices and massive inflation on everything else. It takes fuel to deliver every product that we need to purchase, from food to hygiene products and everything in between. The fact is that these idealistic sanctions against Russia feel more like sanctions against the entire global economy and every country is feeling the aftermath.

In these economically uncertain times, many people return to the purchase of gold and precious metals. Their value tends to be stable in the face of economic change and fluctuation and gold can be a steady fallback option when dollars, rubles, and other currencies are falling in value.

Source: USGoldBureau.com