As everybody who follows the media knows, there has been crisis in Ukraine during the last five months. It has effected on world’s policy with many different ways but especially it has impact on economy. However, the news about that have been scattered so here’s few facts and my opinions about how Ukrainian crisis effects on world’s economic policy.
First of all, the United States have set economic sanctions against Russia, which basically means that the funds of Russian investors and banks are being freezed. To be honest, the situation is quite desperate if I think it from the United States’ point of view. That’s because European Union has completely different – much more moderate – economic policy against Russia under this crisis, and the United States can’t handle the crisis alone. Even the government of the United States has admitted that.
So why does European Union support different economic strategy? The answer is simply: we are dependent on Russian exports. In fact, 40 % of their export products are targeted to European markets and the most important of them are oil and gas. Especially Finland is very dependent on those export products, so that explains why our Prime Minister Jyrki Katainen is promoting moderate economic actions so enthusiastically in EU conferences instead of embargo.
Despite that European Union is commonly dependent on Russian exports, there are also few European countries that have growing export to Russia. For example Italy’s export to ECO countries (Central and Eastern Europe, i.e. Russia, Ukraine, etc.) has been growing faster than export to France or Germany between years 1991 and 2006. Italian export to ECO countries in 2006 was 40,9 billion euros and export to USA was 24,7 billion euros. So when European Union is planning economic actions during this crisis, it’s very important to secure this kind of economic relations. It’s also important to keep future opportunities for business between EU and Russia open.
Even if the European Union would start to set economic sanctions against Russia, it would be unlikely that Russia cares about them. What I think is that Russia is probably one of the most economically self-sufficient nations in the world. Even though many investors stopped investing in Russian companies during this crisis, there are always other investors who are willing to do that.
Anyway, this crisis has shown again that countries don’t always intimidate each other only with armies, but also with different ways of policy. It’s interesting to see how this situation evolves and what kind of effects it has to economy in near future.
Curzio, Alberto & Fortis, Marco 2008. The EU and the Economies of the Eastern European Enlargement