The game of chess is underway and the expectation is what move the West will take in relation to Russia’s invasion of Ukraine. One of Russia’s main fears, the entry of Ukrainians into the North Atlantic Treaty Organization (NATO) is ruled out with the invasion.
“What Putin wants is the formation of a barrier of states to protect himself from an eventual attack from the West”, says political analyst at XP Investimentos, Sol Azcune. Regions that were members of the former Soviet Union or that were in its bloc of influence, such as Estonia, Latvia, Lithuania, the Czech Republic, Slovakia and Poland joined NATO.
The analyst points out that the West’s response to the Russian movement will be very important. She points out that the sanctions adopted earlier this week, when Russia recognized the independence of the breakaway republics of Donetsk and Lugansk, were very light.
Banks and individuals linked to the separatist movement were hit and Germany put restrictions on the Nord Stream 2 pipeline, which connects Russia to a port in northeastern Germany. “But major financial institutions were not hit,” she says.
The expectation is that the sanctions will hit banks important to Russia and that they will also cover Russian oligarchs, figures close to Putin and who control part of the country’s economy.
The XP expert believes that the military conflict is something that must be resolved in the short term. She rules out the entry of NATO troops, which could further escalate tensions.
She rules out that there are very drastic punishments such as Russia’s withdrawal from Swift, the mechanism that regulates international transactions and brings together banks, as it would put the dollar in a more delicate position. This could impact the global supply of oil, as Russia is among the three largest producers in the world and whose prices have surpassed the US$ 100 barrier.
“We have to take care that the spell [as sanções] do not turn against the sorcerer”, says the chief economist at XP, Caio Megale.
But even so, any sanctions against Russia will be limited in scope, because of the country’s strategic alliance with China, the second largest global economy, points out the policy analyst.
Megale points out that this new component comes at a critical time for the world economy. “We are not in a balanced scenario. We have inflationary pressure from demand, disruption in production chains and commodities still on the rise.”
TC Matrix economists point out that in 2022 inflation will be triply affected by the prolongation of logistical problems and the global supply chain and the increase in freight costs; shock in commodity prices, especially energy and agriculture, and shortages and shortages of products.
Megale, from XP, assesses that the trend is for the world’s main central banks to slow down the pace of interest rate hikes, as the invasion represented an additional shock to the world economy and should slow its growth. In January, the International Monetary Fund (IMF) projected a 4.4% expansion for global GDP in 2022.
“Western countries’ sanctions on Russia, the shutdown of industries and commerce and the drop in exports and imports will affect the growth momentum of the global economy”, points out TC Matrix.
The entry of the world economy into a scenario of stagflation, that is, low growth with persistent inflation, cannot be ruled out. “As soon as the world got on the tracks of the post-Covid-19 recovery, it will already have new challenges ahead”, point out economists Fernanda Mansano and Lorena Dourado, from TC Matrix.
They point out that the war environment will make the economy suffer on different fronts. The rule will be instability and uncertainty. “We will see higher inflation, lower economic growth, capital flight from emerging countries, a strong dollar and a general decline in risk assets.”
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