The Ukranian Crisis

As the crisis in Ukraine escalates, the European Union and the United States continue to threaten Russia with sanctions on its officials. However, this has stopped for a while due to the anticipated economic calamities. Economic sanctions usually are very powerful in obtaining leverage over some other nation. In the past the international community had the habit of forcing Iran to the negotiating table. However, in places where the European Union never feared to initiate a global regression crisis, Russia is a major energy supplying nation that is deeply linked with the world economy. In the year 2010, over thirty percent of the EU natural gas and oil originated from Russia. On the other hand, Russia receives close to forty percent of its revenue from natural gas firms and state run oil, approximately eighty percent of these originates from the European Union. This therefore makes the issue of proposed sanctions against Russia a double edged sword.

The EU fear cutting of Russia from the global financial markets or shield firms in Europe from indulging in businesses within Russia. There is also a possibility that Russia would not allow itself to be economically destroyed by cutting off oil and natural gas exports. This would result to a major energy deficiency forcing the EU nations into recession. Russia would equally suffer in cases where companies would forfeit access to liquid global financial markets thus creating a major shortage in the Russian Budget. If the EU pursue this line of action they would likely ignite a global economic regression that has a dire negative effect to Europe at the wrong time.

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Oil prices are determined by the global market; hence such a measure will indirectly affect nations that are not even party to the crisis. In case there is a deficiency of oil in Europe, crude oil prices could rise. The other scenario would be collapsing stock prices, rising prices of energy and feeble trade and foreign direct investment. Some economies within Europe have struggling economies and would be adversely affected by the surging fuel prices. This situation gives the European Union choices that are rather unrealistic. The could either open up vulnerabilities for an economic meltdown through imposing severe sanctions to Russia or give chance to Russia to annex and invade the eastern part of Ukraine with few consequences. This scenario shall however, have creepy geopolitical consequences, but the probability of another similar recession within Europe might defeat them.

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