Russia’s troops are in the separatist region of Ukraine as Putin is all set to invade Ukraine despite a lot of warnings, talks, and dialogs. Countries are now acting – removing ambassadors, citizens and even preparing sanctions on Russia. Now, there is a lot of queries around the term ‘sanction’. Here, in this article, we will share all about – What is a Sanction? Why Countries Impose Sanction? And How Will Sanctions on Russia Affect the Global Market?
What is a Sanction?
A sanction or an economic sanction is a penalty levied by one country on another country. A key instrument of foreign policy and International Relations, the goal is to create an international economic pressure so that the country mend its way – something like a punishment.
How Will Sanctions on Russia Affect the Global Market in 2022?
Prices of Oil and Natural Gas Will Sky Rocket
Now that the west is implying sanctions, energy markets are likely to be hit as Europe relies on Russia for around 35% of its natural gas via Ukraine. It could even halt Germany’s NS2 gas pipeline from Russia.
Now in the event of sanctions on Russia, natural gas exports to Western Europe will be reduced significantly via Belarus and Ukraine – so gas prices could revisit higher prices.
Due to disruptions and curbs, oil markets could also be affected. After all, Ukraine moves Russian oil to Hungary, Slovakia, and the Czech Republic. Besides, Russia is a Superpower When It Comes to Natural Resources including Natural Gas and Oil, and a large part of the natural gas and oil in Europe comes from Russia as they are the second-largest producer of natural gas and third-largest producer of oil.
Also Read: The risks of a new Cold War between the US and China are real: here’s why
Price of Metals Will Be Affected Too
Russia is the second-largest producer of Aluminium and 6% of the global aluminum is supplied by Russia. The conflict and sanctions are all set to increase the prices of Aluminium. The price of Zinc, Nickel, Base Metals, and Steel is also expected to rise.
Expect Rising Prices in Commodities
Ukraine is one of the largest wheat and corn exporter of the world and supplies in Asian as well as African countries. So, if this turns out to be a long-standing war, there will be a wide gap in between supply and demand – expect an increase in price.
Also, expect a rise in oil prices in India – whether it is palm oil, sunflower oil, and/or soyabean oil. Besides, the market is already seeing high prices in gold, silver, rice, and rubber.
Further, if China supports Russia in any which way, we will see rising East-West tensions which can further have an adverse effect on the global markets in 2022 – as it is the GDP is trailing and the inflation rate is going up. The sanctions on Russia have just begun, and the market is already down – expect more to come.
Also Read: How Russia is using International Students as a Weapon in the new Cold War
