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  • Rovindu Ambagolla

Special Report>>> Tension Between Ukraine and Russia: Can the World Economy Handle Another Disaster?

Picture Source: Aljazeera Website

Russia has actively been building up its forces along the Ukraine-Russian boarder for the past few months, and tension between the two states are rising at an alarming rate. Russia has one of the biggest militaries in the world with over 900,000 active personnel, and in recent reports it has been stated that as many as 100,000 Russian soldiers have been deployed along the Ukrainian boarder, provoking the idea of a Russian invasion on Ukraine.

Russia’s aggressive actions has stirred unrest in the international community. Leaders from the EU and the US have taken measures to thwart Russia from entering Ukraine with its military. The US and its allies have started to send in military equipment into Ukraine and NATO (The North Atlantic Treaty Organisation) has put their warships and fighter jets on standby. The US had ordered their diplomatic families in the country to leave as a precautionary move in case of an invasion.

US secretary of State Antony Blinken commented, “We have been very clear that if there is any further Russian aggression in terms of sending Russian forces into Ukraine, there will be a swift, severe, and united response”.

Picture Source: CNN Website

However, this conflict doesn’t just pose a risk of war between Russia and Ukraine (and their allies), but it also threatens financial markets worldwide as well.

Russia’s financial markets have taken a hit since their aggressive deployment of troops. There was heavy selling in Moscow’s stock market, with the Moex index of Russian companies falling by almost 6% to its lowest level since December 2020. The value of the rouble also fell against the US dollar, and the Bank of Russia said that it will halt purchases of foreign currencies in an attempt to stabilise the rouble. Steve Rosenburg, BBC’s Moscow correspondent commented, “The Kremlin can see today that the one thing that muscle flexing and sabre rattling is bad for is the financial markets because what we saw today [was] Russian stocks falling sharply, and the Russian rouble fell against the dollar and the pound”.

However, it isn’t only the Russian markets that will be affected by this conflict because international markets are also under tremendous pressure.

The US is struggling with soaring inflation rates as it hit a 40 year high in December 2021, and the New York stock market is experiencing wild swings. European markets also fell by 3.8% shortly after NATO announced reinforcing its eastern borders.

The EU will be under additional pressure if sanctions are placed under Russia. Russia is a huge producer of oil and natural gas and much of it is exported out to Europe. The EU is already struggling with a major energy crisis and placing sanctions on Russia will directly affect their energy markets negatively.

War of any kind has severe consequences to both parties involved and to the international community, however this conflict if escalated further could have catastrophic consequences to the already weakened global economy.

January 25th 2022 | 2:55 PM

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