Food And Energy Prices 'Likely To Surge Further' Due To Russia Sanctions
Food And Energy Prices 'Likely To Surge Further' Due To Russia Sanctions: ING
Ihsaan Fanusie Thu, March 3, 2022
Sanctions on Russia will likely have a significant impact on the global economy, a recent ING (ING) report found.
"By now, we all know that Europe gets nearly 40% of its natural gas and 25% of its oil from Russia (this differs across countries), and is likely to be walloped with spikes in heating and gas bills, which are already soaring," ING Global Head of Macro Carsten Brzeski wrote in a report released earlier this week. "Given that Ukraine and Russia have also been labelled as the global breadbasket, food prices are also likely to surge further. Both countries account for roughly a quarter of total global exports."
The sanctions, however, were designed to punish Russia without tanking economies reliant on Russian commodities since Europe is heavily dependent on Russian gas for fuel for various energy expenditures such as heat and gas.
“The sanction response to the military escalation so far has been aggressive and generally coordinated, but careful not to disrupt Russia’s key commodity exports to the main partners,” Brzeski explained. “That is probably explained by Russia’s importance to the commodity and financial markets, and also by the necessity to leave room for additional pressure in case of further military escalation.”
An employee is seen at an oil platform operated by Lukoil Company at the Kravtsovskoye oilfield in the Baltic Sea, Russia September 16, 2021. REUTERS/Vitaly Nevar
Even so, these sanctions will have important implications for the global economy in the short run, and potentially the long run, too. With the costs of doing business increasing for many Russian institutions, certain sectors in the world economy reliant on Russian industry may also see higher prices for crucial goods.
Perhaps the most potent effect that the sanctions will have on the global economy is a rise in energy prices. Russia is a powerful player in the energy sector, and several Western nations rely on Russian oil and gas.
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