Tensions between Russia and Ukraine have reached a boiling point.
Russia has now invaded the disputed region of Crimea and has issued an ultimatum telling Ukrainian forces to surrender by 12 a.m ET or face military action.
We’ve pointed out that Ukraine is dependent on Russia for natural gas, to help it fund its external debt, and trade in general. But what about the impact on Russia?
Credit Suisse’ Alexander Redman and Arun Sai write that the “Crimea intervention” will also impact Russia. Here are five things we can expect (verbatim):
- Russia’s potential expulsion from the G8 and termination of the G8 Sochi meeting.
- European governments expediting measures to reduce dependency on Russian gas imports.
- Russia’s isolation from global capital markets with clear negative consequences for the ruble and Russian equities.
- Broader economic and trade related sanctions and freezing of Russian state owned enterprise foreign assets and assets of key Kremlin officials.
- Highly publicized national boycotting of Sochi Paralympics.
They do point out that there could of course be more penalties against Russia.
Vladimir Osakovskiy, an economist at BofA Merrill Lynch, writes that direct costs of a war could amount to 3% of GDP.
Nomura’s Alistair Newton also said that Russia might be “obliged to provide extensive economic support, at least for those parts of Ukraine, which it has pulled firmly into its sphere of influence, which would add to the burden on Russia’s economy.”
The economic impact on Russia is likely to be less severe than that on Ukraine, but it’s not about to get a free pass either.
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