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Russia and Ukraine Tensions Spur Economic Volatility

Global markets eased as Russia’s tensions with Ukraine were mitigated following an announcement by Vladimir Putin

that Russia was not yet at a point to use force but that he warned they would use “all options” if the vendetta reached

a breaking point.


As a result, markets swelled  as the S&P 500 jumped up in similar amounts with the Dow Jones Industrial Average and

the Nasdaq Composite and oil and gas prices eased. In order to quell the volatility Russia faced during the tension, the

Russian Central Bank raised temporary interest rates. With the erratic and relative unpredictability of Putin as well as

the fact the Russian Government continues to “find its feet” in Kiev, Russia could soon be facing a precipitous decline

in foreign investment and an exodus of large amounts of currency. Even and this dispute plays out further, Putin has

already threatened to abandon the dollar as a reserve currency. Capital flight may be a result of the audacious political

endeavors which ensue and in the future the Russian Central Bank may be finding itself taking action to stabilize the

financial system. Critics and enthusiasts say that it does have the firepower to quell any volatility and will not hesitate

to do so. In the meantime, investing in Russia may be a dangerous and unreliable investment and as Russia has

always been a seemingly hostile environment for foreign capital, hopefully there will be a day when it will be a safer

and more trustworthy environment.



  1. blizzard blizzard

    It has been interesting watching financial markets respond to the Russian occupation of the Crimea. It seems that markets agree with most political experts in predicting this situation will not boil over into a large armed conflict between the Russian Federation and the West. But even if the crisis only results in economic sanctions by the EU and US, the occupation could have significant impacts on the world economy. Russia supplies over 30% of Europe’s natural gas energy needs, and has demonstrated in the past that the state controlled Gazprom has no problem cutting off this supply entirely in political disputes. Natural gas is already being cut off in parts of Ukraine as Russia fights to maintain its influence over its neighbor. Such a supply shock could send energy costs in Europe through the roof and undermine the economic recovery taking place there.

  2. minh minh

    People respond to speculations so the fact that the West may apply trade embargo on Russia stimulates the uncertainty of profitable investments in Russia. Thus, in this case, we can observe a lot of macroeconomic movements due to changes in demand, supply, and profit expectations. Government interventions may be able to curb market volatility to a certain extent, but if tension between Russia and the West remains high, it will be even harder to control in the future.

  3. gjeong gjeong

    Yes, right now is not a good time to invest in Russia or its neighbors. In addition, it will be interesting to see how the U.S. and the EU will respond to Russia’s actions. It is possible that they can stop trades with Russia (economic sanctions) or the United Nations can step up and take some measures.

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