Investors around the globe are bracing for a rocky week in markets amid news of massive sanctions being imposed on Russia and growing uncertainty about the state of the world.
Russia is being hit with the “mother-load” of sanctions. Just as the international community cuts Russia off from SWIFT (the international banking system that connects all banks) the U.S. is freezing Russia’s reserve currency holdings…about $640 billion.
Together, the moves will cement Russia’s position as the pariah of Europe—putting it in a similar spot to North Korea or Iran.
The move will be devastating to the Russian economy, Russian oligarchs and Putin’s inner circle. It may even prove to be Putin’s ultimate undoing.
Already, oligarchs are breaking ranks; on Sunday, Billionaire Mikhail Fridman, co-founder of the Russian Financial firm Alfa-Group told staff at his London based private equity firm that, “war can never be the answer.”
In a letter to his team, the Ukrainian-born Fridman wrote that, “This crisis will cost lives and damage two nations who have been brothers for hundreds of years.”
But sanctions will not just hurt the Russians. In the coming weeks, sanctions will effect everyone. Consumers will face even higher prices at the gas pumps, corporations will see a decline in profitability thanks to higher energy input costs… and multi-national corporations with assets in Russia will need to recognize that their holdings have effectively evaporated overnight.
Over the weekend, BP, announced it would divest its nearly 20% stake in Russian oil company Rosneft. Shell and Exxon Mobil also have significant investments in Russia, along with brewing giant Carlsberg and automaker Renault.
Investors are anticipating a reduction in those companies’ stock prices.
Meanwhile, Europe and the U.S. will soon experience even more inflation as energy prices begin to soar. Russia supplied roughly 40% of Europe’s natural gas…as estimated $100 billion worth of energy, so the repercussions of tighter supplies will be massive on the broader economy.
The financial hit, however, is a price investors, corporations and the global economy must be willing to take. Standing up for freedom and the sanctity of a sovereign nation, is a matter of principle. How can the U.S. be respected as the “world’s reserve currency” if we’re not willing to come to the aid, through sanctions, of vulnerable nations.
How can a U.S. or European corporation expect to continue with business-as-usual knowing all that has happened?
Sanctions at this moment are critical and necessary.
But ultimately, this tragedy should serve as a stark reminder to the West that we must become more self-reliant. We must focus on our own critical industries, including the domestic production of energy. Because in times like this, we need all the home-grown energy we can get.
Trish Regan is the award-winning Founder and Editor-in-Chief of https://TrishIntel.com and host of “The Trish Regan Show” podcast https://podcasts.apple.com/us/podcast/the-trish-regan-show/id1526687124 on Apple Itunes. You can follow her on Twitter at @Trish_Regan and on Instagram at @Trish_Regan.
