For example, an important trade status for Russia was abolished. According to Ifo, this is roughly equivalent to excluding Russia from the World Trade Organization (WTO), which makes it much easier to lift all kinds of tariffs and other barriers to international trade against Russia.
Iron, steel, vodka and caviar
But there are also other measures. For example, the European Union prohibits the export of luxury goods to Russia and prohibits the import of Russian iron and steel. The United States will ban Russian vodka, diamonds, and seafood products such as caviar. Washington has already banned imports of Russian fossil fuels.
Germany said on Saturday that it will almost finish importing Russian oil by the end of this year. “Every day, even every hour, we say goodbye to Russian imports,” German Economic Affairs and Climate Minister Robert Habeck told the Frankfurter Allgemeine Zeitung newspaper. According to him, Germany may have already stopped importing Russian coal by the fall, and for oil, it should be largely by the end of the year. According to the German Statistics Office, about a third of imported oil comes from Russia and 45% of coal imported by Germany. Germany is also highly dependent on Russian natural gas. This import is difficult to stop.
European Commission President Ursula von der Leyen said in turn that Russia will be suspended from the International Monetary Fund and the World Bank. The International Monetary Fund has already stated that the Russian economy will plunge into a deep recession this year as a result of the severe sanctions imposed by the invasion of Ukraine.
Russia is also being hit hard as Western companies are largely withdrawing from the country. Commerzbank announced its departure from Russia on Saturday. Thus, the second largest bank in Germany follows the example of Deutsche Bank. Commerzbank indicates that it is no longer doing new business in Russia and that it will gradually discontinue existing transactions.
Major US banks Goldman Sachs and JPMorgan Chase are also leaving Russia. The same goes for furniture giant Ikea and burger chain McDonald’s, among others.
Not only the Russian economy is affected. US Treasury Secretary Janet Yellen said during a visit to Denver that the war in Ukraine and harsh Western sanctions against Russia could harm the US economy. According to her, the US economy is strong and will perform well this year.
The armed conflict in Ukraine and sanctions caused a sharp rise in oil prices, which made the fuel more expensive for consumers. Yellen said the US government is now looking at cutting fuel taxes to help families. “We are looking at a range of options to support consumers, including lowering the fuel tax.”
Higher energy prices increase inflation. In order to counteract this high inflation, the Federal Reserve that forms the umbrella of the US central bank is likely to raise interest rates next week. Yellen argues that high inflation is a problem and that monetary tightening can lead to weaker economic growth. She is confident the Fed will handle this well.