Economic consequences of Russian invasion of Ukraine, by Patrick Boyle
US and allies are removing some Russian financial institutions from Swift, and imposing major restrictions on Russia's central bank.
The R central bank has $640b in foreign exchange reserves, much held at various western central banks. But some is in Russia and in China (also not expected to be frozen). So they have about $240b in available reserves. The war costs an estimated $20b per day. This could cause bank runs, tank the Ruble, and cause panic among Russian businesses.
The US has previously imposed sanctions on the central banks of Iran, N Korea, and Venezuela.
S&P lowered Russia's rating to junk (high borrowing rate), and Fitch lowered Ukraine's, and Moody's might do both.
Russia produces 10m barrels per day of oil. Because Europe and other countries are dependent so heavily on Russian oil and gas, the reaction was slower to their invasion than might otherwise have been the case.
Germany specifically. While 2022 was set to be the date for the shutting down of all nuclear power in Germany (it's down to 3 plants now and they're planned to shut this year), a plan started 20 years ago and fortified by sentiment after Fukushima in 2011. Also all of Europe has been reducing coal energy and other types like that, focusing on clean energy, but it hasn't happened very fast so they still depend heavily on Russian gas. That effects BP and Total Energy are exposed to Russian energy. BP owns almost 20% of Rosneft, an investment that sent $2.4b profits last year for BP.
Increases in fertilizer prices, a secondary effect of sanctions of Russian gas exports, will push food prices up everywhere.
Russia and Ukraine together make up about 1/3 of grain production in the world. Potatoes, sugar beets, sunflower oil also. Food factories are shutting down plants in Ukraine temporarily. There could be food shortages, potentially. Food shortages, which could affect Egypt, Tunisia, Morocco, Pakistan and Indonesia, could lead to political consequences like uprisings.
Aluminum, dependent on electricity, 14% of world production in Russia (excluding China).
Metal producers are cutting their output after natural gas prices shot up like 30%.
Nickel (batteries), lots is produced in Russia. Palladium (catalytic converters, electrodes and electronics ie auto manufacturing countries like China and North America) too. Platinum (catalytic converters, lab equipment, electrical contacts and jewelry). C4F6 and Neon (semiconductors) are produced by both countries.
Ukraine is a big producer of titanium (aircraft manufacturing, jewelry, phones, surgical tools).
US started cutting banking exposure to Russia in 2014 (Crimean conflict), but Austria's Faiffeisen makes 1/3 of their profits in Russia, and some other European banks are also highly involved in Russia.
UK airlines can't use Russian airspace right now to fly to China. Expected to be all of Europe soon.