Refresh for updates... Days after Russia sent troops into Moscow-backed regions of Ukraine, the US has been upping its response by adding to targeted financial sanctions. Yesterday the US slapped sanctions on the company building Russia’s $11B Nord Stream 2 gas pipeline which spans from Russia to Germany after Germany halted its opening.
- Punishment: Western leaders are using the pipeline as leverage against Russia, since oil exports = 30% of Russia's economy.
- Risk: Russia supplies more than a third of the EU’s natural gas, and could retaliate by shutting off some of those fuel exports.
- Next: More sanctions seem likely. Late last night, President Biden said the US and its allies "will be imposing severe sanctions" on Russia, and will continue to provide support to Ukraine.
Companies are nervous... Most Western corporations don't have operations in Russia and Ukraine. But large multinationals that do are bracing for further sanctions, which Western leaders could leverage:
- Oil: BP, Exxon, and Shell all have significant investments in Russia that could be threatened by sanctions on Russia’s energy market.
- Banks: Chase and Citi, which do business in Russia, would have to cut ties with local lenders if broad financial sanctions happen. Cross-border payments could be frozen, which might mean lost $$$.
- Cars: Dodge and Jeep parent Stellantis says it would limit production in Russia if sanctions disrupt its operations.
- Beer: Danish brewer Carlsberg is Ukraine’s biggest beer seller, while Russia accounts for 10% of its sales. It has breweries in both countries and said it’s working on contingency plans in case sanctions disrupt beer-making.
Sanctions could hit consumers hardest… especially Europeans. Western companies were relatively unaffected by Russia’s 2014 annexation of Ukraine’s Crimean Peninsula. American and EU officials say sanctions will be harsher this time, and consumers could feel that at the pump. As the world’s #2 exporter of natural gas and #3 exporter of oil, Russia can cut supply at a time when prices are already sky high. Americans, who are facing for the highest gas prices since 2013, could experience even more pump anxiety if global supply shrinks.