This backgrounder explains the significance and risks of the Russian invasion of Ukraine. See each question and answer included in this backgrounder on the Russian invasion of Ukraine at the bottom of this post.
Could This Produce An Economic Crisis?
Almost certainly. It is important to realize that nothing happens in a vacuum in the interconnected global economy. Events in Russia and Ukraine cause ripple effects in other parts of the world. Sanctions on Russia impact nations and economies that have nothing to do with the war. This weekend the western world imposed unprecedented sanctions on Russia, a major power whose economy is tightly interlinked with the global economy.
The global economy is still reeling from two years of upheaval brought on by a pandemic. Russia’s invasion of Ukraine and subsequent sanctions by the US and NATO have now produced further chaos into an already fragile global economic context. Inflation rates were rising across the globe before the invasion began. That process will only accelerate now. Central banks and international financial organizations have instruments and steps to implement in these situations, but in most circumstances, such tools were already exhausted during the pandemic.
This morning the value of Russia’s currency dropped by 30% against the dollar on news of US and NATO sanctions employed over the weekend. It was the largest one-day slump in Russia’s currency value in modern history, similar to what was experienced in the late 1990s when Russia defaulted on its debt. When currency values decrease, everything immediately becomes more expensive. This will worsen inflation in Russia, but there is a growing concern that this collapse in Russia’s currency could set off bank runs there.
Learn more about the background and facts behind the Russian invasion of Ukraine through this set of backgrounds and explanations. Subscribe to the blog to stay up to date when new backgrounders are posted.
- Why Is This A Big Deal?
- Why Did Russia Invade Ukraine?
- Was Russia Provoked?
- Facts About Ukraine
- Who Is Volodymyr Zelensky?
- Who Is Winning the War?
- What Happens Next?
- Could This Produce An Economic Crisis?
- Could This Produce A Food and Energy Crisis?
- Could This Produce A Refugee Crisis?
- Why Did Russia Raise Its Nuclear Alert?
- Is This the Beginning of World War III?
