The Economic Effects of Russia’s Invasion of Ukraine.

Todays video is sponsored by the DailyUpside, a entirely free, high quality daily business and finance newsletter. Visitthe link in the description to learn more. Welcome back everyone, exactly a speedy video todayto talk through the recently announced sanctions on Russias Central Bank and the likelyeconomic effects of Russias invasion of Ukraine. Obviously, there are much greaterconcerns than these economic issues. The ongoing statu is being described as the worst crisisin Europe since the second world war and the human impact of this invasion is both horrific andimmeasurable. My heart extends out to the people of Ukraine who are in a absolutely horrid situation.Now, plainly this is a very fast-moving situation, so Im rushing to get this video upquickly. I dont usually upload on weekends, but the most recent news is that the United Nation, Canada, and European allies have all agreed earlier today to remove sure-fire Russian financialinstitutions from SWIFT, but more importantly to impose major restrictions on Russias centralbank.There has been a lot of discussion around blocking Russia from SWIFT and I made a video onthe topic two days ago, but this move to target Russias central bank is much more of a bigdeal and it comes with very little precedent. Russias central bank has more than $640 billion in foreign exchange modesties, much of it is held at various western central banks. 23% of their modesties is held in gold, and that is all stored at the Russian Central Bank, 14% isin China which is probably safe from sanctions, and the rest appears to be held at variouscentral banks around the world.This meant that around 400 billion dollars of Russiascentral bank funds have just been frozen, leaving them with around 240 million dollars inavailable reservations and a fighting that is possibly costing them $20 billion per period. Freezing orquarantining the countrys substitutes like this will set massive distres on the Russian financial system.It could trigger bank extends, barrel the ruble, and make panic among Russian businesses.The United Commonwealth had already sanctioned Russias largest banks, but Moscow was stillable to use its foreign reserves to prop up those banks.Removing that alternative, blocksMoscows ability to bail out its banks. This action is the most severe financial measureimposed on Russia over its raid of Ukraine. The United Mood has previouslyonly imposed sanctions on the central banks of Iran, Venezuela and North Korea.Cutting Russian banks out of Swift will make it more difficult for Russians to construct cross-bordertransactions, but as I mentioned under my prior video, SWIFT is really just a messaging system. Quick sends pay the guidelines and verifications, but the actual money is transferredby central bank RTGS arrangements. RTGS stands for Real-time gross settlement. The sanctions on theRussian Central Bank are much more significant, as they block coin from moving at all.Other sell bulletin relating to this conflict is that S& P chipped Russias credit rating to junkstatus on Friday after the attack. Additionally, Fitch lowered Ukraines credit rating and Moodyswarned that both countries could face strokes. The S& P credit downgrade stripsRussia of its investment tier rating, meaning that Russia would have to pay higherborrowing costs.Obviously, the credit rating scarcely matters now that Russias central bank isbeing sanctioned. A low credit rating is the least of their problems, when no one can lend to themanyhow. The credit rating agencies specialize in closing the door after the colt has boltedSo, what are the other economic the consequences of the Russian invasion of Ukraine? Well, first up, Russia is the third-largest oil producer in the world they producearound 10 million barrels of oil per day. Russian lubricant was already trading at a deduction inthe lead up to the invasion of Ukraine as nervous customers backed away from dealing with Russia.There has obviously been a lot of talk in the press about Russian oil and gas exports, and of course some of the slow international response that we ascertained relates to how dependent somecountries are on Russia for their power needs. Nuclear power made up merely over 13% of German electricity supply in 2021, and this was generated by six power plant, three of which were switched off at the end of last year.The remaining three are scheduledto be shut down in December of this year. This shutdown is part of a intention put in place byGerhard Schroeder 20 years ago and then after the 2011 Fukushima nuclear disaster, AngelaMerkel determined 2022 as the final deadline for shutting down all nuclear power in Germany. On exceed of this, the EU has been cutting the use of coal and other hydrocarbons in electricitygeneration, to reach their climate destinations and have been focusing on the buildout of renewable energy.The problem is that this buildout isnt happening quickly enough, so Europe is quite dependenton Russia for natural gas at the moment. BP and TotalEnergies are the Europeanoil makes that have the greatest revelation to Russia. BP owns approximately 20 per cent ofRosneft – one of Russias largest petroleum farmers. This stake rendered benefits ofmore than $2.4 bn for BP last year. Next up, nitrogen is a key component in mostsynthetic fertilizers, and this is made by combining nitrogen from the breath with hydrogenderived from methane to produce ammonia. The ammonia is then used to create other formsof nitrogen including ammonium nitrate and urea. Natural gas is needed both for the methaneand as information sources of hot for the process.An increase in fertilizer premiums can be expectedto push up food tolls around the world. The cost of fertilizer is not the only thingthat could push up food tolls various regions of the world. Russia and Ukraine are both large-scale particle exporters.The two countries combined make up almost a third of the worlds wheat exports. Ukraines output ofgrain and potatoes is among the highest in Europe, and it is among the worlds largestproducers of sugar beets and sunflower oil. Wheat and other particle costs have soaredsince the Russian invasion of Ukraine. A number of western food companies and brewershave functionings in Ukraine.Mondelez, the maker of Cadbury chocolate and Oreo cookies announcedlast week that they were suspending operations at their two Ukrainian mills. Carlsberg, the worlds third-largest brewer, said that work at all three of their breweriesin Ukraine have been halted. Cargill, the US agricultural trading group andNestl, the world countries largest food companionship both have substantial procedures in Ukraine toothat will be interrupted. Nestle announced that they have temporarily closed their threefactories and busines center in Ukraine. The stoppage of grain exports from Ukraineand Russia will possibly lead to physical food shortages, particularly in countries thattypically buy from Russia and Ukraine. These shortfalls could impact millions ofpeople living in places like Egypt, Tunisia, Morocco, Pakistan and Indonesia. Thesefood shortages could of course then have political significances in these countries.Food shortages often lead to uprisings. Wheat is the currency of monies accordingto Lenin, and even in the breadths of the cold war, the Soviet Union had to buy huge quantities ofwheat from the United Position. If Russia wants to sell wheat, they do have railing links to Chinaand could use these links to export grain. Now, you could argue that other grain producingparts of the world could just plant more wheat to offset the Russian and Ukrainian shortage, but that would be dependent on the availability of fertilizers.Russia has prohibited theexport of nitrogen fertilizer until April and China has proscribed the export ofphosphate fertilizer until at least June, other producing areas around the worldmight struggle to increase production. Now, before I go any further, let me quicklytell you about todays video sponsor The Daily Upside. If you are struggling to finduseful and unbiased business and business word, the daily Upside might be the solutionto your trouble. The Daily Upside is a entirely free daily email newsletter, written by a teamof monetary professionals with real industry experience. Its become the first thing Iread every morning as it is informative, entertaining, and not dumbed down. They dontjust give you a standard take on the story, it is the most important news with realanalysis. They had a really good piece a few days ago on The fiscal stakesof Russias Ukraine invasion. Whether you are a business professional or justlooking for a great source of business news, the daily upside will assist. It is totally free tosign up and they send you one report filled email every morning.I cant recommends the following enough.Sign up abusing the link in the description below. Next up causes talk about metals. Russia is amajor source of widely distributed metals that are needed in manufacturing. Russia producesaluminium, nickel, palladium and titanium and Ukraine is the worlds third-largestexporter of high-grade iron ore pellets. Excluding China, Russia details for 14 per centof the worlds aluminium production. This is used in everything from sucks cans to automobiles.The price of aluminum is also strongly dependent on the rate and accessibility of electricity.The cost of electricity fixes up almost a third of the total price. So we have a few movingparts here that could drive up prices. The business strain inflicted by high naturalgas premiums, which jumped 30 per cent on Thursday, has already forced several big metalproducers to cut their output. Next up, Russia is the third-largest producerof nickel worldwide after Indonesia and the Philippines.Russia exported three billiondollars worth of nickel in 2020. Nickel is an important metal used in batteries. Its pricehas already more than doubled over the last five years heading carmakers to look at alternativematerials for their electric car batteries. Russia is also the leadingglobal producer of palladium, building up 40% of world-wide palladium supply.In 2020, Russian palladium production was 91 metric tons. Palladium is usedin catalytic converters, electrodes and electronics, the top palladium consumingregions are China and The americas. A reduction in the availability of palladium can beexpected to thump the automobile manufacturing sector. Russia is the number two world root ofplatinum which is also used in catalytic converters on vehicles. Russia causes 12 per cent of the members of the world platinum quantity. This is however well behind South africans whichproduces 70% of the worlds total platinum production. Its major consumes are in catalytic converters, labequipment, electrical contacts and jewelry. Ukraine is the sixth largest producer of Titaniumin the world. Its used in aircraft manufacturing in particular by producers like Airbus, Boeing and Rolls-Royce. It is also used in jewelry, prosthetics, tennis rackets, bicycleframes, surgical implements, and mobile phones. Russia and Ukraine are key sources of two veryimportant industrial gases, C4F6 and neon which are vital to semiconductor production. Ukraineproduces a one-fourth of the worlds neon, the cost of which has tripled in the past six months dueto Chinese sword mills that create the gas as a byproduct being shut down for the Winter Olympics.Chip makes could be affected if gives from Ukraine are unavailable for an extendedperiod. These gasses are essential for chip manufacturing, peculiarly neon which is used inlasers that inscribe pieces on to computer chips. The next industry we should discuss is banking.Western banks began chipping their showing to Russia after the attack of Crimea in 2014. ButRaiffeisen, the Austrian bank stimulates more than a third of their advantages in Russia.Frances SocitGnrales has a Moscow-based subsidiary, Rosbank, that has 550 forks and 3 million Russiancustomers, while UniCredit controls 103 sprigs and has 2 million purchasers in the country.Russia accounted for 6 per cent of UniCredits earnings last year and 4 per cent of SocGens.Western rule firms, conduct consulting conglomerates and accounting houses all haveoffices in Russia and Ukraine. Many of these houses have been busy gettingtheir staff out of Ukraine and are preparing to be hit with counter sanctions in Russia. Thesebusinesses would likely ascertain a decline in benefits. Creating is of course an important sector ofthe Ukrainian economy. Commodities manufactured in the country include metal goods, transportationequipment and another type of heavy system, various categories of substances, foodproducts, and other goods. Ukraine grades among the top sword creators inthe world, and then the countrys ponderous industries make trucks, automobiles, railway locomotives, shipped gondolas, ships, hydroelectric paraphernalium and electrical generators. Houses like Bosch have plantsin Ukraine making factors for vehicles, and there are other conglomerates that produce electricalcables used in the automotive industry. A number of carmakers have mills in Russia, including Renault, Stell Antis, Toyota, Kia and Nissan.Renault has the most exposure. Theyhave three mills there and account for time under a third of the vehicles sold in Russia.Stellantis is the only auto maker with a basi in Russia that exports a significantvolume of vehicles to Europe. This situations of conflict and the hard sanctions can beexpected to worsen the world furnish chain dislocations which we have been verifying over thelast year and a half.The interconnected nature of the world-wide render order and time in timemanufacturing mean that a lot of important commodities used in manufacturing around theworld may be in short supply for a while. Russia and The United Country don’t havestrong economic ties and transaction between the two is fairly negligible. The US has activelyreduced its show to Russia as it has been trying to restrict Putins influence and aiming toprotect its own security interests from Russia. As of Saturday, the Kremlin hadbanned airlines from the UK, Bulgaria, Poland and the Czech Republic fromflying over or mooring on its territory. This has presented numerous operationaldifficulties for UK airline, which are generally use Russian airspace when flyinginto parts of Asia including China and Japan. Virgin Atlantic had to suspend a roadway thattransported cargo between London and Shanghai, while British Airways shown it would rerouteplanes to avoid Russian airspace, leading to longer flight experiences and higher gasoline costs.It can be expected that most if not all European airlines will be banned from Russianairspace, in fact that is likely to happen before I get this video even uploaded to YouTube.Airline companionships have most probably been impelling plans to deal with this issue and will likely needto reroute around Russian airspace if restricted. This is less of an issue right now as there arefar fewer flights from Europe to countless metropolis in Asia at present as countless places are stillclosed to visitors because of coronavirus. Finnair is an airline that would be moreaffected by these flight stoppages as they have built their long-haul businessmodel around superhighways to Asia flying over Russia. Azerbaijans Air Navigation Assistance haveopened up some additional air traffic superhighway for airlines looking to avoid Russian airspace.Obviously, the Russia Ukraine situation is developing very rapidly and theirs is agood chance this video is out of date by the time I upload it, but hopefully youfind some of the information beneficial. Dont forget to check out our patronize TheDaily Upside, by clicking on the link in the video description.Its a great newsletter thatI can firmly recommend. If you liked this video, you should watch this one next. Have agreat day and talk to you again soon. Bye ..

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