US sanctions on Russia will come at a price for most US citizens
US sanctions on Russia will have an ag price for most US citizens, as conflict in Europe culminates after Russia’s invasion of Ukraine. US President Joe Biden on Thursday unveiled the most significant sanctions ever imposed on Russia, including the freezing of Russian banks and assets in America.
First, on February 22, Biden warned Americans that a Russian invasion of Ukraine and American efforts to punish it economically would also hurt the American economy. “Defending freedom will have costs, for us too and here at home,” Biden said. “We have to be honest about it.”
Moreover, since the invasion is already underway and war has broken out, the United States will face serious economic harm, according to William Hauk, an economist. According to his column at The Conversationthe economic effects in the United States are already palpable, particularly on the price of gasoline.
Moreover, the United States is facing the fastest rate of inflation in 40 years. The pace of such inflation would greatly depend on how far Putin traveled. If Russia cuts gas supplies to Europe and Ukraine suffers disruptions in its ability to export food, the United States could face high inflation.
On the one hand, Russia is one of the largest energy exporters in the world. It produces around 12% of the world’s oil and 17% of its natural gas. Consequently, it is the world’s third largest producer of oil and the second of gas. It is also Europe’s largest natural gas supplier, which gets almost half of its supply from Russia.
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US sanctions on Russia could create high inflation as food and energy prices spike
If Russia cuts off Europe’s energy supply, it will first face serious and devastating effects. However, as energy markets are highly interconnected, the United States will not be immune. In fact, the consequences are already palpable. Gasoline prices in the The United States soared to over $3.50 a gallon. Also, gasoline prices are going from $6 to $7 per gallon in California.
Also, as we reported earlier, oil prices peaked at over $100 a barrel. With Germany freezing Russia’s Nord Stream 2 pipeline, which would have carried liquid natural gas from Russia to Western Europe while bypassing Ukraine, the economic disruption will eventually affect the entire market globally.
On the other hand, Ukraine produces 16% of the world’s maize and 12% of its wheat, while being a major exporter of barley and rye. With Ukraine under attack, its export capacities could be affected in terms of shortages. Therefore, prices will peak everywhere.
In fact, according to The Conversation, grocery store prices in the United States rose 7.4% in January, compared to a year earlier.
Finally, the biggest risk to the US economy would be inflation. Some economists believe that the United States could soon experience 10% inflation; against 7.5% now. Such a spike in inflation had not occurred in the United States since October 1981.