Economics Disrupted

This quick take is part of our Crisis Crossroads series which highlights timely analysis by CSIS scholars on the evolving situation in Ukraine and its security, economic, energy, and humanitarian effects.

Russia’s invasion of Ukraine has rattled a global economy already struggling with rising inflation, slowing growth in China, and lingering disruptions from Covid-19. Imposition of the most severe sanctions in the postwar era on the world’s 11th-largest economy, which accounts for 10 percent of global oil production and 40 percent of Europe’s natural gas supplies, caused the ruble to plummet and sent shockwaves through global energy and financial markets. The global economic outlook could darken further if Moscow retaliates with energy export restraints, cyberattacks, or seizure of Western assets in Russia.

The threat of sanctions clearly did not deter Putin from moving into Ukraine, but the unprecedented breadth and speed of sanctions imposed across the Western world surely took him by surprise. The decisions to deny Russian banks access to the SWIFT financial messaging system and to freeze the Russian central bank’s assets will cause real pain in Moscow. Most surprising—possibly as much to the Biden administration as to Putin—has been the forceful action by the European Union, which has cast aside earlier doubts about U.S. intelligence and the political feasibility of sanctions to take the lead in responding to the Russian aggression.

In the near term, the Ukraine crisis has distracted from other Biden economic priorities; the invasion occurred almost simultaneously with the White House’s release of its one-year supply-chain reviews, and as it prepared to roll out a new Indo-Pacific economic strategy. Moreover, the heavy use of sanctions—while appropriate to the moment—will increase incentives for China and others to reduce their dependence on the dollar. But Putin’s action and the forceful Western response have arguably put a conflicted China on the back foot, reminded the world of the perils of authoritarianism, and given the United States a chance to reassert its preferred rules and norms, including in global economic affairs.

Matthew P. Goodman is senior vice president for economics at the Center for Strategic and International Studies in Washington, D.C.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).