As of yesterday there is officially a war in ukraine we didn’t know for weeks whether we would actually get to this point or not but now it’s a fact i believe that the actual cost in all of this is the loss of innocent lives and i don’t see any positive outcome nor short-term or longer-term for any of the parties involved having said this if you have an interview
In these days you’re likely going to be asked about the economic implications so that’s what this video is about the situation now is that russia has recognized the separatist regions of donetsk and luhansk and has positioned troops in kiev and under strategic points in ukraine it seems clear that now at least western europe doesn’t really want a war so they’re
Not going to get involved this early the best thing they can do for now is to retaliate with sanctions and there’s really three types of sanctions that they can inflict the first one is personal sanctions on russian oligarchs the second is economic sanctions like an embargo on russian exports and the third is financial sanctions personal sanctions mean that the
Oligarchs will be banned from doing business and traveling to nato countries now this might be annoying to some of them but the effects on the global economy will be limited to understand instead the potential implications of economic sanctions we have to look at what russia sells and where as you can see from this chart the majority of exports are natural resources
Such as crude oil refined oil and gas if we look at who the country sells to we see that a big chunk is europe and then asia so it might seem that an embargo would hurt them very much maybe make them rethink their military actions but the truth is that they could just divert part of their exports to china china only gets 16 percent of their total oil consumption
From russia so they could easily double that percentage and that will leave russia almost compensated at the same time that vacant space in europe could be filled by saudi arabia which is effectively what happened when the u.s imposed sanctions on iran so the point here is that on a global scale the impact of economic sanctions would be harsher but still limited
Because oil gets reshuffled around and that’s because it’s quite easy to transport by ships and especially now that supply chains are somewhat recovered natural gas is another story though because it’s much more difficult to transport that’s why the decision of germany to shut down north 2 will have more serious consequences for europe it will disrupt supply
Chains and it will add to inflationary pressures the last weapon is financial sanctions and this is what biden is all over at the moment with japan joining in saying that they will ban trading of russian bonds the u.s could even go further and target big international russian banks and limit their ability to get loans from overseas which they very much need to pump
That oil lastly the most damaging one would be cutting russia of zwift which is the system that international banks use for messaging and payments this would have the greatest impact on russian economy because it really limits their ability to import and export anything not just financial assets but this could also backfire if china allowed russia to use their
Own payment system for example because they’re very likely to be allies in this situation if this happened that we would see russia and china get super cozy and that’s not an outcome that nato really wants to happen so there’s a lot to think about here both strategically and tactically as well so the bottom line is that this year in just a couple of weeks we went
From inflation armageddon to world war three i expect global growth forecasts to be cut and also equity returns to be revised down unless the situation suddenly de-escalates a very serious conflict makes inflation worse in the short term and we’re already seeing that in the price of commodities with oil approaching again 100 of a row but then depending on how
Many regions get involved work end up being deflationary for markets because it kills consumer sentiment so without this demand pool economies tend to cool off if that were the case then we shouldn’t expect central banks to raise interest rates as aggressively as the market is pricing today which i think is nine hikes in the uk nine hikes in the us and five in
The uk well that was everything for today thank you so much for watching this far i hope this was useful and i’ll catch you in the next one you
Transcribed from video
What War means for the Markets | Finance Interview Q&A By Brainy Finance