The U.S. has announced a second round of sanctions in protest of Russia’s takeover of Crimea. President Obama said the new sanctions would hurt the Russian economy.
Meanwhile, the Russian takeover of Crimea is scaring off investors. Companies stocks are suffering, Russia’s richest people are also losing money and smaller businesses are scared about the future.
The Atlantic’s Derek Thompson joins Here & Now’s Sacha Pfeiffer with details.
SACHA PFEIFFER, HOST:
From NPR and WBUR Boston, I'm Sacha Pfeiffer. It's HERE AND NOW.
Today, President Obama continued to try to isolate Russia by imposing more sanctions against some officials and wealthy businessmen with ties to Vladimir Putin. Putin fired back by refusing to allow U.S. lawmakers to enter Russia. What effect is this ongoing crisis over Crimea having on Russia's economy? Derek Thompson is a senior editor at The Atlantic, and he joins us now as he does every Thursday to talk about this. Hi, Derek.
DEREK THOMPSON: Hello.
PFEIFFER: And Derek, when President Obama first imposed the sanctions within the past week, Russians basically just scoffed at them. Any indication that this second round will make a difference and will matter?
THOMPSON: It's important to note that these sanctions aren't on companies. They're not on sectors. They're on individuals like you said, on Russian officials, and on a bank that's particularly close to these individuals. The purpose of the sanctions at this point isn't necessarily to destroy the Russian economy and punish tens of millions of people who had no say in Russia's incursion into Crimea. It's to punish the Russian officials who did have a say in Russia's incursion into Crimea.
That said, the invasion itself has imposed a punishment on Russia's economy. The big picture here is that we had this theory that countries that were capitalist democracies don't invade each other or that are part of the capitalist system don't invade each other because they rely too heavily on global trade that's going to be crushed when there's an invasion, when there's a possibility of war. And we've seen this in Russia. Stocks have fallen to a four-year low. The currency, the ruble, has fallen 20 percent or is down considerably and could be down even further in the next week. So the Russian economy has been hurt, absolutely.
PFEIFFER: And although, as you said, sanctions aren't on companies or sectors. But has there been a trickle-down effect of this sort of overall collapse and these sanctions on any particular industries? Like is tourism affected in any way, if not directly, by the sanctions than by some other side of that?
THOMPSON: It's important to note that 62 percent of Russia's imports and exports go to Europe. And so what's important to look at, I think, in the next few months is that Russia is very much ingrained in the global economy, especially through its petroleum and petro gas trade. So as these sanctions continue to come online, you know, what the president is doing is he doesn't want to extend his hand too far in the first few rounds. He's going to punish a few individuals, and then a few more officials and a few more banks that are close to those officials, to try to phase in these sanctions. And we're going to see what the effect is on the Russian economy and on the EU as well.
PFEIFFER: And what about Crimea's economy? We've read that some ATMs are empty there because banks are having difficulties getting currency. So what's happening in Crimea?
THOMPSON: Crimea and the rest of eastern Ukraine, this is actually where the food harvest happens in Ukraine. Ukraine very much is a food, you know, a breadbasket of the world. Forty percent of all the wheat grown in Europe is grown in eastern Ukraine, and the wheat harvest is actually due in the next few months. So we're going to see the effect of this invasion, I think, on the (unintelligible) economy. Maybe not just yet but certainly over the next few months, because, you know, like I said, the big picture here is that this isn't the 1910s, 1920s, when economies were much more independent.
Globalization over the last 30 years has absolutely intertwined these economies, particularly in the energy and food markets. So we're going to see potentially some major disruptions in food prices if there's a lot of nervousness over Russia's continuing involvement on the eastern Ukrainian market.
PFEIFFER: And Derek, in about the 20 seconds we have left, any indication that the EU might be imposing sanctions on Russia as well?
THOMPSON: Obama is going to speak to them, I think, in the next week. I think what you're going to see is that - there's a wait-and-see period. You know, they're going to take a look at whether it seems like Russia is going to invade any other parts of eastern Ukraine. I mean that would really truly be a disaster. But I think that that's exactly what we need to keep our eye on for the next week.
PFEIFFER: Derek Thompson is a senior editor at The Atlantic. Derek, thank you very much.
THOMPSON: Thank you. Transcript provided by NPR, Copyright NPR.