How Russian Financial Sanctions Will Impact Global Business

There are several ways that Russian financial sanctions will impact global business. After the invasion of Ukraine, the United States implemented a variety of economic sanctions on Russia. In fact, these sanctions are among the deepest and broadest throughout the history of the US. More so, they will significantly affect US-based and national businesses. As a business owner, there is a chance your company can be directly influenced by these enforced solutions. Read on to discover how Russian financial sanctions will impact global businesses.

Inflation Of Goods

First, Russian financial sanctions will impact the inflation of goods. The enforced sanctions are not explicitly focused on Russia’s energy sectors. However, the price of oil and gas have increased immensely due to possible future disruption. In fact, we were already experiencing a highly increased level of inflation because of loose monetary policies. As a result, businesses around the US, especially central bankers, are being exposed to challenging operations. Of course, the future of inflation is unpredictable. For example, the United States could be subject to high inflation with low economic growth and increased goods and service taxes. Or, they may not be impacted at all. Therefore, businesses, policymakers and companies around the world are creating solutions to maintain their businesses in times of crisis. Certainly, Russian financial sanctions will impact the inflation of goods.

Ban Access To Western Capital Markets

Secondly, the financial sanctions enforced on Russia will impact access to Western capital markets. Access to Western capital markets has banned Russian banks and companies. As a result, there will be a significant outflow of Russian foreign investors. Additionally, it is predicted that these investors will lose up to $50 billion in investments in a single year. More so, this ban will influence Russian banks’ ability to repay foreign debt. These sanctions will directly affect Russia’s repayment schedule and increase their debt. In fact, over the next 12 months, Russia will have to pay back more than $100 billion. However, they will need support from external financial resources. Of course, Russian financial sanctions will affect access to Western capital markets.

Removal Of Secure Financial Telecommunications

Additionally, Russian financial sanctions will impact the removal of secure financial telecommunications. Russia was recently removed from SWIFT. However, government payments were not impacted as expected because of Russia’s payment system. The system only covers 5% of domestic payments. Meanwhile, the majority of transactions are managed through the Bank of Russia Payment System (BRPS), the country’s alternative to SWIFT. In fact, BRPS covers intraregional electric payments (VER), Banking Electronic Speedy Payment system (BESP system) and the system for interregional electronic payments (MER). Certainly, financial sanctions in Russia are impacting the removal of secure financial telecommunications.

Reduced Travel

Of course, the financial sanctions placed on Russia will impact travel. Russia is a big contributor to tourism and luxury goods. In fact, they are especially generous towards Europe’s fashionable vacation spots, including both the Italian and French Rivieras. Plus, Egypt, which is a key destination for many Russian tourists, might also lose finances due to these sanctions. As a result, these locations, travel industries and small business finances were brutally affected by the implemented sanctions. More so, these sanctions are projected to force the sales of luxury valuables such as real estate and yachts. This might be due to the seizure of assets or because owners can’t travel to their properties. Surely, Russian financial sanctions are impacting travel.

Effect On Shipping

Finally, Russian financial sanctions will affect the shipping industry. Shipping segments, such as commodity traders, containers, dry bulk and gas, have already seen increased impacts. In fact, as companies and large shipping container lines are eliminating connections with Russia, supply chains are becoming congested. This is because vessels are being diverted, restricted and delayed. An example of possible impacts includes shipping companies running afoul sanctions. Russian crew members will be paid through a sanctioned bank for services and supplies at a specific marina or port. However, this can be risky as shipowners and operators can cancel or suspend operations due to unacceptable sanctions issues or violation of Club rules. Certainly, Russian financial sanctions will impact the shipping industry.

There are various ways that Russian financial sanctions will impact global business. First, Russian financial sanctions will impact the inflation of goods with increased prices for oil, gas and other products. Secondly, these sanctions will affect access to Western capital markets and will influence debt repayment schedules. Next, the removal of secure financial telecommunications are impacted as Russia was removed from SWIFT. Of course, sanctions will influence travel since Russia is a big contributor to travel in Europe and Egypt. Finally, these sanctions will impact the shipping business due to diverted, restricted and delayed vessels. These are a few global business sectors impacted by Russian financial sanctions.

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