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Writer's pictureJoe Lloyd

The Brief (02/03/22)

This edition of the brief will be dedicated entirely to the developing crisis in Ukraine. The next brief will deal with any news neglected this week.


Ukraine was invaded by Russia on February 23rd and has since been trying to repel a vicious onslaught from ground, sea and air with some success.


Above photo courtesy of Haaretz.


It has been difficult to write about this story as the fog of war has descended over Ukraine and Russia and information is scarce and untrustworthy. The situation has also been rapidly changing over the past week and the reader should bear this in mind when reading any news about Ukraine. I will do my best to separate certainty from conjecture and paint as clear a picture as possible.


One large unknown thus far in the conflict is the human cost. Estimates vary wildly, the Ukrainians claim to have killed nearly 6,000 Russian troops whilst the Kremlin has stayed characteristically quiet on the details of the conflict. It would be wise not to take any death toll estimates as fact until things calm down and more neutral parties make their opinions known.


All we can be certain of so far is that thousands have died. Most of these deaths will be military personnel but hundreds, if not thousands, are Ukrainian civilians. It is anybody’s guess what will happen next but it is likely that the current toll on human life will be dwarfed by what is to come, with increasing numbers of Ukrainian towns and cities being cut off from the rest of their country, supplies dwindle in many high-density urban areas.


In terms of the geography of the Russian advance, this map created by Al Jazeera (below) gives a good idea of what is going on.


A serious situation is evolving regarding the displaced Ukrainians that have begun a refugee crisis of similar magnitude to the Syrian refugee crisis - around 700,000 Ukrainians are said to have left their homes. The economic and political effects of this migration flow will be massive and problematic in the years to come, especially in the right-wing led countries who have been opposed to mass immigration for so long, namely Poland, who has seen the majority of fleeing Ukrainians cross its border.


The MOEX Russian stock index crashed almost 50% following the invasion before being suspended on the 25th by the Russian government. The Russian Rubel collapsed and fears mount over inflation, not just in Russia, but all over Europe, exacerbating inflation worries that were created by the pandemic.


(Above) photo of queues outside Russian bank courtesy of CNBC.


Rumours of runs on Russian banks are beginning to surface but are impossible to verify. It is not likely that the Russian government will allow information of economic hardship to reach western media and the full effect of the invasion and sanctions on Russian people may be kept from us indefinitely.


Around the world, financial reactions to the news have varied, but nowhere outside of Russia has it been catastrophic. The DAX (the primary index for Euro stocks) fell on news of the invasion and sanctions on Russia – the fall wasn’t massive and was in the direction of a pre-existing trend so alarm bells were not sounded.


The FTSE 100 (UK stock index) and S&P 500 (US stock index) fared quite well over the week which signals two things: first, it means speculators aren’t too worried about the possibility of a world war. Secondly, it means the Russian billionaires and oligarchs (that have been the main targets of sanctions) likely got their money out of western stocks long before the invasion news broke.


Some Russian entities were unable to sell their western stocks due to the freezing of assets that was announced with sanctions, the idea of an asset seizure is also being floated around. Details of sanctions are found below.


Oil prices reached a 7-year high. Measures are being taken by western entities to keep consumer prices down and, more importantly, to stop western reliance on Russian gas. This factor played a key role in many countries’ approaches to sanctioning Russia.


The sanctioning of Russia has been a focal point for news coverage of Ukraine. Military and financial aid from Ukraine’s friends will play a major role in the defence, but western countries wished to employ a more direct form of opposition to Putin’s campaign.


Sanctioning has been used sparingly in the past, notably it was used against the Japanese empire in the 1940s, and is seen by many as the reason for Japan’s attack on Pearl Harbour. The effectiveness of sanctions in achieving international goals is still unproven, I’m not going to try and predict the future, but I will round-up all the economic sanctions that have been announced thus far so you can follow the story easier from here on out.


The EU, UK and US have been the main economic players involved with the sanctioning of Russia. Though not exactly the same, the moves have been made in largely the same vain by the EU, UK and US. The idea being that sanctions made in lockstep with one another will maximise the effect on Russia whilst minimizing the effect on individual ally nations.


Above courtesy of (from left to right) Insight EU Monitoring, CNBC, The Japan Times.


For example, they have all frozen the assets of wealthy Russian individuals. They have banned their citizens from doing business with companies, banks and institutions that they suspect could be assisting the Russian war machine and banned the exports of goods that could be used in the war.


Russia has been cut off from major international initiatives like Nord Stream 2 and Swift with a general aim of cutting the country off from the international financial sphere. By the same token, Mastercard and Visa, who deal with 90% of payments outside of China, have cut off their services in Russia.


The UK has been somewhat of a frontrunner in sanction packages. Boris Johnson’s sanctions were the first announced from the major western powers and are, like the EU’s sanctions, some of the harshest economic sanctions ever. The US’ sanctions are also harsh but not quite on the level of the European nations.


The UK and EU went further than the US on several fronts. They blocked all Russian ships from exiting their ports, banned Russian planes from their airspace and started removing Russian access to their capital markets (preventing Russians from selling debt in Europe). The UK also increased efforts to deal with "dirty Russian money” in UK politics.


Hopefully this article has got you up to date if you were out of the loop on the sanction-side of the war. We will likely update you on the situation in the coming weeks so keep an eye on our uploads.

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