Russia-Ukraine war: What it means, what happens next

Russia, on Thursday, announced that it is initiating a ‘military operation’ in Ukraine, after days of escalating tensions. Reports and visuals of Ukrainians trying to flee the capital city of Kyiv and the Russian army moving in emerged following the invasion, which many are dubbing as World War III.

Ukraine called it a 'war of aggression' and said that it would fight and win. The US said that the world will hold Russia accountable for its attack and also warned that it will amount to a catastrophic loss of life. President Joe Biden called this attack ‘unprovoked and unjustified'. 

The UK said that President Vladimir Putin has chosen a path of ‘bloodshed and destruction’, while Finland called it an attack on the entire European security order. 

Amid the condemnation also came a series of sanctions from the European Union, the US, United Kingdom, Germany, Canada, Australia and Japan.

Truth be known that Putin is not a great fan of the expansion of the US-dominated North Atlantic Treaty Organisation (NATO) in its immediate backyard. Russia is also concerned about Ukraine’s steps towards it. 

Following the military operation, NATO Secretary General Jens Stoltenberg said, “This is a grave breach of international law and a serious threat to Euro-Atlantic security. I call on Russia to cease its military action immediately and respect Ukraine’s sovereignty and territorial integrity. NATO Allies will meet to address the consequences of Russia’s aggressive actions. We stand with the people of Ukraine at this terrible time. NATO will do all it takes to protect and defend all Allies.” 

Also read: Russia-Ukraine crisis: Here’s how it can impact geopolitics and global economy

Here’s a look at what this military action means and what is likely to happen next. 

What it means for Russia

Along with sanctions from a list of countries, Russia’s access to the SWIFT system of payments could also be blocked. One of the harshest options US and its allies have reserved is to cut Russia off from SWIFT. Society for Worldwide Interbank Financial Telecommunications or SWIFT, is a Belgian financial service that connects more than 11,000 financial institutions across the globe. It allows banks and financial institutions to alert one another of transactions about to take place.

The US could unilaterally decide to cut, even though it has been in discussions with its European allies. Sanctions on Russian banks would mean that SWIFT will be in violation if it lets these banks use its system, according to a report in New York Times. 

Also read: 'Maintain calm': India issues advisory to stranded citizens in Ukraine

But whether cutting off Russia from the SWIFT system would mean the same as in the past remains to be seen as many countries, including Russia have developed their own financial messaging systems.

Furthermore, the US warned Russia that it would impose the strictest sanctions on it. The US rolled out the first set of sanctions on Tuesday targeting members of Putin’s inner circle and two banks it considers significant for the functioning of the Kremlin and the Russian military. The US has prohibited any new American investments in the breakaway regions of Donetsk and Luhansk, forbidding importation, exportation, sale or supply of goods, services and technology. 

The EU has put Russian politicians and officials on blacklists, banning trade, import and export with separatist entities. Politicians who were involved in the recognition of the breakaway regions have been put on the blacklist. The union said that these sanctions aim “to target the ability of the Russian state and government to access the EU’s capital and financial markets and services, to limit the financing of escalatory and aggressive policies.” Donetsk and Luhansk could also be removed from a free trade deal. 

The UK has issued sanctions on five Russian Banks and three high net-worth individuals and allies of Putin, while Germany suspended the certification process for the Nord Stream 2 natural gas pipeline that directly links Russian gas to Europe.

Australia, Canada and Japan have said that they will issue sanctions too.

Also read: Russian forces invade Ukraine: Here's how the world reacted

However, the New York Times stated in separate reports that Russia’s largest trade partner is China. These sanctions could push Russia into closer economic ties with the Asian economic giant. The two countries had recently signed a 30-year contract for gas supply to China. Experts believe that Russia is likely to pivot all its energy and commodity exports to China. 

The news site also mentioned that experts believe that Russia could blunt the potency of sanctions through digital currencies or cryptocurrency to bypass control points. Moreover, the Russian government is creating its own central bank digital currency, a digital ruble. Its largest trade partner China already has its own central bank digital currency. 

What it means globally

What the world is staring at right now is the increase in prices of certain metals and wheat, as well as a supply-chain chokehold. While Russia is an enormous country with a population of 146 million, its economy has limited importance in the global economy. It is, however, a key supplier of oil, gas and raw materials. 

Russia’s impact on the European economy is likely to be far more significant than, say, the US. Forty per cent of Europe’s natural gas and 25 per cent of its oil comes from Russia, as mentioned in a report in NYT. European leaders have already accused Putin of reducing supplies. 

Food prices, that inflated to their highest in more than a decade due to the pandemic supply constraints, are likely to be further impacted. Russia is the world’s largest wheat supplier with Ukraine accounting for nearly a quarter of total global exports. 

Also read: Ukraine crisis: List of countries that have imposed sanctions on Russia

Some countries like Egypt and Turkey are likely to be severely impacted as 70 per cent of their grain imports come from that flow. Turkey will be under immense pressure as it is already amid an economic crisis. 

Ukraine the ‘breadbasket of Europe’ sends more than 40 per cent of its wheat and corn to the Middle East or Africa. 

Meanwhile, oil prices already surged on Thursday, with Brent breaching $100 a barrel for the first time since 2014. Brent crude rose to as much as $103.78 a barrel, the highest since August 14, 2014, and was at $103.18 a barrel at 0830 GMT, up $6.34, or 6.5 per cent.

Prices of palladium, a metal used in automotive exhaust systems and mobile phones, could also see an increase following sanctions on Russia, which is the largest exporter of the metal. 

Gold prices that were expected to see an increase already saw a jump. Prices of the yellow metal spiked more than 2 per cent to hit its highest in over a year. Spot gold climbed 1.8 per cent to $1,941.50 per ounce by 0841 GMT, after hitting the highest since January 2021 at $1,948.77. US gold futures jumped 1.7 per cent to $1,943.20.

Cobalt, copper and aluminium are also likely to see fresh highs.

Also read: Russia may use cryptocurrency to steer clear of sanctions: Report

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