The US sanctions on Russia will come with a price ag for most of the US citizens, as the conflict in Europe peaks after the Russian invasion of Ukraine. US President Joe Biden unveiled this Thursday the biggest sanctions on Russia ever, including the freezing of Russian banks and assets in America.
Firstly, on February 22, Biden warned Americans that a Russian invasion of Ukraine, and the US efforts to punish it economically, would also hurt the US economy. “Defending freedom will have costs, for us as well and here at home,” Biden said. “We need to be honest about that.”
Moreover, as the invasion is already ongoing and the war has broken out, the US will face severe economical mischiefs, according to William Hauk, an economist. According to his column at The Conversation, the economical effects in the US are already palpable, particularly in the gas price.
In addition, the US is facing the fastest pace of inflation in 40 years. The pace of such inflation would greatly depend on how far Putin goes. If Russia cuts gas supplies to Europe, and if Ukraine suffers disruptions in its food exports ability, the US might face severe inflation.
On the one hand, Russia is one of the largest energy exporters in the world. It produces approximately 12% of the world’s oil and 17% of its natural gas. Consequently, it is the world’s third-biggest producer of oil and second-largest for gas. It’s also the biggest supplier of natural gas to Europe, which gets nearly half of its supply from Russia.
Also recommended for you: Chernobyl nuclear plant, a strategic location in the Russia-Ukraine conflict. Click here to read.
US sanctions on Russia might create severe inflation, food and energy prices to peak
If Russia cuts energy supplies to Europe, it will face severe and devastating effects firstly. However, as energy markets are highly interconnected, the US won’t be immune. In fact, the consequences are already palpable. Gasoline prices in the US soared to over $3.50 a gallon. Also, gas prices are going from $6 to $7 a gallon in California.
Furthermore, as we have reported earlier, oil prices have peaked at more than $100 per barrel. With Germany freezing the Russian Nord Stream 2 pipeline, which would have carried liquid natural gas from Russia to Western Europe while bypassing Ukraine, economic disruptions will eventually affect the entire market around the world.
On the other hand, Ukraine produces 16% of the world’s corn and 12% of its wheat, as well as being a significant exporter of barley and rye. With Ukraine under attack, its export capabilities might be affected in terms of shortages. Therefore, prices will peak everywhere.
In fact, according to The Conversation, US grocery prices were up 7.4% in January, compared to a year earlier.
Finally, the biggest risk for the US economy would be inflation. Some economists believe the U.S. could soon see 10% inflation; up from 7.5% now. Such a peak in inflation has not happened in the US since October 1981.
