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Cold War 2.0? The Global Economic Impact of Sanctions Against Russia | WSJ - YouTube
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- I'm announcing the first
tranche of sanctions.
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- These sanctions are a major step.
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- And we hold further
sanctions at readiness
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to be deployed.
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- This is about as close
to global economic war
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as we've ever come.
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- Compared to all historical campaigns,
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this is staking sanctions to the limit.
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- The economy is tanking,
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the ruble has fallen through the floor.
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Inflation is soaring.
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Interest rates are up.
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- [Narrator] The Russian
invasion of Ukraine triggered
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a global economic response
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without precedent in terms
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of its speed, scale and scope.
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- The sanctions we
imposed have generated 2/3
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of the world joining us.
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They are profound sanctions.
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- The European Union and its partners
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are working to cripple Putin's ability
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to finance his war machine.
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- [Narrator] In a matter of days,
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the US, the UK, the EU and others
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essentially unplugged the
world's 11th largest economy
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from the global economic system.
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- We have never applied such deep, severe
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and far-reaching sanctions
on such a large country.
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Vladimir Putin himself has
called it a declaration of war
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and in economic terms, he's not far off.
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- [Narrator] But will
this financial assault
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on the Russian economy
actually achieve its goal
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of pressuring Russian
President Vladimir Putin
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to call off his troops?
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- The big gamble right now
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is to see if the West can
bankrupt Russia enough
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that they cannot fight an insurgency.
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- [Narrator] Moreover, what
will be the consequences
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of this economic war
for everyday Russians?
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And how will this conflict
affect the US economy
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and the lives of everyday Americans?
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In 1990, just months after
the fall of the Berlin Wall,
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Russia's first McDonald's
opened in Moscow,
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a sign that the nation was
joining the global economy.
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But on March 8th of this year,
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the chain announced that
it would be closing all
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of its restaurants in Russia temporarily.
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- It definitely feels
like a new Iron Curtain
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is coming down between East and West.
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I mean, back during the Cold War,
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it was taken for granted
that the Soviet bloc
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and the Western bloc did
not trade with each other
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and we're in some sense
returning to that world.
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- [Narrator] The first move
was made by Western governments
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when they targeted Russia's banking system
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by blocking the Russian Central Bank
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from selling its foreign
currency reserves.
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- We will stop Putin
from using his war chest.
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- Perhaps the most severe impact
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has been the seizing of the assets
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of the Central Bank of Russia.
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Basically, Putin put away a lot of money
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for a rainy day to help
him weather the storms
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of future sanctions episodes.
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(Vladimir speaking in foreign language)
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- [Narrator] Sanctions sent the value
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of the ruble to an all-time
low against the dollar.
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Prices for Russia's
most important exports,
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like natural gas, nickel and
wheat shot up to record highs.
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The US, the EU, the UK and
Canada removed some Russian banks
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from SWFIT, the financial
messaging network used
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by banks across the globe.
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Additional sanctions included blacklisting
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Russia's biggest banks from
the global financial system,
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legislation to freeze Russian
oligarch wealth abroad.
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- This is not an economic crime bill,
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it's an economic warfare bill.
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- [Narrator] And export restrictions
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for certain technologies.
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- We estimate that we'll
cut off more than half
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of Russia's high-tech imports.
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- [Narrator] This economic
war may have begun
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with government sanctions
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but as the conflict has continued,
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private companies and investors
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have begun to voluntarily
sever ties with Russian.
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- Many Western companies,
without being forced to,
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are simply packing up and leaving Russia.
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We're seeing, even though in
theory Russian oil and gas
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is exempt from sanctions,
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many market participants simply don't want
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to do business with Russian oil and gas.
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- [Narrator] Some
Western companies decided
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to suspend operations in Russia,
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while others decided to pull out entirely.
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(Vladimir speaking in foreign language)
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- [Narrator] For everyday Russians,
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the sanctions can be seen in emptier shops
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as foreign brands and businesses
pause their operations
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or exit the country entirely.
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There's also bank runs
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as those with deposits
in foreign currency rush
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to take it out or convert
their rubles to dollars
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to protect the value of their savings.
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- Imagine that you had a bank account full
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of money and you said, well,
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there's all the money I
need to buy my groceries,
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put gas in my car, to
pay my mortgage bill.
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And then one day the government said,
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"I'm sorry, you have all that money
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but we're not gonna let
you have access it."
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What's gonna happen?
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Well, you're gonna starve,
your car's gonna run out of gas
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and you're gonna default on your mortgage
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and that is more or less
what's happening to Russia
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on kind of a macro scale.
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- [Narrator] Russian
bond prices also sank.
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The country's dollar-denominated
sovereign bonds
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were quoted at around 17 cents
on the dollar on March 2nd,
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down from 95 cents the previous week.
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- It is more or less being shoved
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into the financial
equivalent of the Stone Age.
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- You'll see over the coming
weeks that a global economy,
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a Western-oriented economy,
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a relatively well-off middle class economy
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is gonna see its livelihood be wiped out.
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- [Narrator] Although
Russia will bear the brunt
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of these sanctions,
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their impact is already
being felt across the world.
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- You don't cut yourself off from one
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of the world's largest exporters
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of oil and gas and other
valuable commodities overnight
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and expect there to be no effect.
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- [Narrator] This month, the
price for brent crude oil
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hit a record high.
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- Today I'm announcing the United States
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is targeting the main
artery of Russia's economy.
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- [Narrator] The Biden
administration banned the import
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of Russian oil, though the
US only imports about 8%
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of its oil from Russia.
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(Vladimir speaking in foreign language)
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- [Narrator] Russia
produces 11% of global oil
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and possesses 25% of the
world's natural gas reserves,
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so cutting those resources off
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from the global economy is
unlikely to happen overnight.
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That's especially true
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for Russia's biggest natural
gas customer, Europe,
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which relies on Russia for about 40%
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of its natural gas.
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- And that's the big question mark.
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Who's gonna touch gas first?
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It's a third rail.
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Will Europe do it
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and say we're gonna take the
economic costs no matter what?
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- Putin could preempt that
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and stop shipments of
oil and gas to Europe.
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That would have a dramatic impact
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on European economies
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but it would also mean
that no money is flow
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or hardly any money is
flowing into Russia anymore.
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- [Narrator] Russia's also
the world's largest exporter
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of wheat, a major exporter of coal
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and one of the top producers
of metals and fertilizer.
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- How are we gonna
replace that grain, right?
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How are we gonna make sure
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that North Africa and the
Middle East don't starve
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as a result of this?
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- [Narrator] Sanctions are supposed
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to compel a country to change its behavior
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but some experts say these economic tools
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don't always accomplish their goals.
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- I think it could backfire.
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Yeah.
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- [Narrator] Julia
Friedlander says historically
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they've rarely forced
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the targeted country
to change its behavior.
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- If your goal is to stop a war,
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to stop Putin from flattening Ukraine
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using financial means, then you may lose.
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Putin tomorrow could flatten Ukraine
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through aerial bombardment
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and then sanctions would
have meant nothing.
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We might come to see that these sanctions
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were not worth it.
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That all of the effort that we expended
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actually caused more crisis
than we had reckoned with.
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(dramatic music)
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- [Narrator] In some cases,
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sanctions have hastened global conflict
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rather than ending it.
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- If you go back in history,
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you can find the sanctions
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or oil embargo against Japan
pushed the Japanese regime
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into a corner and led them
to respond militarily.
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And we got Pearl Harbor.
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- [Narrator] On March 16th,
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Fed Chairman Jerome Powell announced
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that the central bank would
be hiking interest rates
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to curb rising inflation,
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which is being exacerbated by the war.
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- The surge in prices of crude oil
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and other commodities that resulted
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from Russia's invasion of Ukraine
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will put additional upward pressure
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on near-term inflation here at home.
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- The American government can take steps
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to help manage and assuage some
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of the pain that is being felt
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by those that are affected most directly
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by the increased energy costs.
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- Right now there is extraordinary support
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across the West for these sanctions
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and for the Ukrainian people.
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It is not clear that six months from now
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after a period of very
painfully high prices
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and perhaps weaker economic growth
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if that support will still be there.
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