Russian Financial Sanctions and Their Impact on the Global Economy

Since Russia invaded Ukraine in February of 2022, the US and other countries such as Germany, Italy, France, Canada, and the UK, have all issued massive sanctions against Russia in an attempt to pressure the Kremlin to draw back and end the war. However, at the individual level, it’s difficult to tell whether these sanctions are hurting Russia or the rest of the world’s citizens. 

In the past, sanctions against Russia have been focused on the Kremlin and not the entire Russian economy. The Kremlin was restricted, but Russia was still doing business in the global market, in which it is deeply ingrained. This time things are very different. 

As global trading generally happens with the use of USD, the US has the power to enforce heavy sanctions on other countries. In this case, the US banned all Russian oil and natural gas imports and it removed Russia from SWIFT, which allows cross-border trading, and other countries and entities followed suit. 

In one fell swoop, the US and other countries potentially crippled the Russian economy to contract by more than 20% just in 2022. 

Not only are the heavy sanctions focused on oil, natural gas, and global trade, but they can include travel bans, asset seizures, trade embargos, import/export controls, and capital controls. Russia is surely feeling the hit, but they aren’t the only ones. 

Since so much of the world’s oil and natural gas, as well as wheat, comes from Russia and Ukraine, people across the globe are feeling the effects of these unprecedented sanctions. Inflation is skyrocketing and we’re experiencing the fallout at the gas pump, in the grocery store, and virtually everywhere else that we do business. 

Interestingly, as Russian citizens began to be concerned about their economy and the decreasing value of the ruble, many of them began to purchase gold and other precious metals. Gold has been the long-standing foundation for currencies and it still stands up against crumbling currencies. 

Buying gold and precious metals in times of economic instability can be one of the wisest investments to make. The value of gold is stable and doesn’t fluctuate in the same way that dollars and rubles can. It’s something to fall back on when currencies fail.