As Russia launched its invasion of Ukraine, Western nations — including the United States — issued a round of sanctions aimed at cutting off Russian financial institutions, restricting debt and equity for Russian corporations, and targeting certain Russian elites.
With a GDP of $1.48 trillion, Russia is the world’s eleventh largest economy — smaller than the United Kingdom, Italy, France, and other countries with fewer human and natural resources. With a GDP per capita of just over $10,000 — compared to $63,500 for the United States and $45,700 for Germany — Russia also punches below its weight in terms of economic productivity per citizen.
However, sanctions against Russia will still have tangible repercussions for Western consumers.
For one, Russia contributes greatly to the global supply of energy. Each year, Russia exports crude petroleum, refined petroleum, petroleum gas, and coal briquettes to the tune of $123 billion, $66.2 billion, $26.3 billion, and $17.6 billion respectively.
“Russia is incredibly unimportant in the global economy except for oil and gas,” Harvard economist and former Obama administration adviser Jason Furman told The New York Times earlier this week. “It’s basically a big gas station.”
Although the primary impact of any disruptions in oil supply will hit Western Europeans, oil is a fungible resource. Because a barrel of crude oil exported from Saudi Arabia is virtually identical to a barrel of crude oil exported from Russia, the United States, or China, countries with a large share of international oil production have a massive influence over global prices. This is the reality that enables OPEC nations to jointly toggle their exports such that price levels benefit their members.
Indeed, as consumers in America and across the world are currently learning, a phenomenon in one corner of the global economy has ripple effects. The current supply chain crisis is induced by COVID-19 lockdowns that paused manufacturing activity in many parts of Asia. Through government and private institutions alike, the same interconnectedness defines the global financial system.
“You have to look at the backdrop against which this is coming,” EY-Parthenon chief economist Gregory Daco told The New York Times. “There is high inflation, strained supply chains and uncertainty about what central banks are going to do and how insistent price rises are.”
Beyond the flow of energy and other goods, Russia may retaliate against the United States and its citizens through cyberattacks. Russia was likely behind a cyberattack earlier this year that compromised 70 Ukrainian government websites, and Russian criminals have been known to carry out cyberattacks on American entities, including food suppliers.
“We have to be realistic and understand that as we impose sanctions — we take actions — there could be blowback here,” explained Rep. Jim Langevin (D-RI) at The Wall Street Journal’s recent CIO Network Summit. He advised American companies that they have a “role to play,” recommending that they implement testing procedures to back up and restore data, institute multi-factor authentication, and patch known vulnerabilities, among other actions.
“During challenging times such as these, the Russian operatives could be using password spraying attacks, recycling passwords from past password data dumps [and] using artificial intelligence,” added Fortalice Solutions chief executive and former Bush administration official Theresa Payton.