“She’s well-trusted in the government and by the president,” said Sofya Donets, an economist at Renaissance Capital in Moscow who worked at the central bank from 2007 to 2019. In recent years, it was quite evident that all kinds of policy questions in the financial sphere were delegated to the central bank, she added.
This trust was built up while Ms. Nabiullina was buttressing Russia’s economy against Western sanctions, especially from the long reach of American penalties. In 2014, the United States cut off many major Russian companies from its capital markets. But these companies had large amounts of foreign currency debt, raising alarms over how they would service their debts.
The Russia-Ukraine War and the Global Economy
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A far-reaching conflict. Russia’s invasion on Ukraine has had a ripple effect across the globe, adding to the stock market’s woes. The conflict has caused dizzying spikes in gas prices and product shortages, and is pushing Europe to reconsider its reliance on Russian energy sources.
Global growth slows. The fallout from the war has hobbled efforts by major economies to recover from the pandemic, injecting new uncertainty and undermining economic confidence around the world. In the United States, gross domestic product, adjusted for inflation, fell 0.4 percent in the first quarter of 2022.
Russia’s economy faces slowdown. Though pro-Ukraine countries continue to adopt sanctions against the Kremlin in response to its aggression, the Russian economy has avoided a crippling collapse for now thanks to capital controls and interest rate increases. But Russia’s central bank chief warned that the country is likely to face a steep economic downturn as its inventory of imported goods and parts runs low.
Trade barriers go up. The invasion of Ukraine has also unleashed a wave of protectionism as governments, desperate to secure goods for their citizens amid shortages and rising prices, erect new barriers to stop exports. But the restrictions are making the products more expensive and even harder to come by.
Prices of essential metals soar. The price of palladium, used in automotive exhaust systems and mobile phones, has been soaring amid fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, another key Russian export, has also been rising.
Ms. Nabiullina set about squeezing as many U.S. dollars from the economy as possible, so that companies and banks would be less vulnerable if Washington further restricted access to the country’s use of dollars.
She also shifted the bank’s reserves, which grew to be worth more than $600 billion, toward gold, the euro and the Chinese renminbi. Over her tenure, the share of dollars in the reserves fell to about 11 percent, from more than 40 percent, Ms. Nabiullina told Parliament last month. Even after sanctions froze the bank’s overseas reserves, the country has “sufficient” reserves in gold and renminbi, she told lawmakers.
Other protections against sanctions included an alternative to SWIFT, the global banking messaging system, developed in recent years. And the bank changed the payments infrastructure to process credit card transactions in the country so even the exit of Visa and Mastercard would have minimal effect.
In March, Bloomberg News and The Wall Street Journal, citing unidentified sources, reported that Ms. Nabiullina had tried to resign after the Ukraine invasion, and had been rebuffed by Mr. Putin. The central bank rejected those reports.
Last month, the Canadian government placed her under sanctions for being a “close associate of the Russian regime.”
LONDON — In the five weeks since Russia invaded Ukraine, the United States, the European Union and their allies began an economic counteroffensive that has cut off Russia’s access to hundreds of billions of dollars of its own money and halted a large chunk of its international commerce. More than 1,000 companies, organizations and individuals, including members of President Vladimir V. Putin’s inner circle, have been sanctioned and relegated to a financial limbo.
But Mr. Putin reminded the world this past week that he has economic weapons of his own that he could use to inflict some pain or fend off attacks.
Through a series of aggressive measures taken by the Russian government and its central bank, the ruble, which had lost nearly half of its value, clawed its way back to near where it was before the invasion.
And then there was the threat to stop the flow of gas from Russia to Europe — which was set off by Mr. Putin’s demand that 48 “unfriendly countries” violate their own sanctions and pay for natural gas in rubles. It sent leaders in the capitals of Germany, Italy and other allied nations scrambling and showcased in the most visible way since the war began how much they need Russian energy to power their economies.
Russian oil exports normally represent more than one of every 10 barrels the world consumes.
Europe’s ongoing energy purchases send as much as $850 million each day into Russia’s coffers, according to Bruegel, an economics institute in Brussels. That money helps Russia to fund its war efforts and blunts the impact of sanctions. Because of soaring energy prices, gas export revenues from Gazprom, the Russian energy giant, injected $9.3 billion into the country’s economy in March alone, according an estimate by Oxford Economics, a global advisory firm.
Ursula von der Leyen, said as much when she announced the new energy plan last month: “We simply cannot rely on a supplier who explicitly threatens us.”
Security concerns aren’t the only development that has undermined Russia’s standing as a long-term energy supplier. What seemed surprising to economists, lawyers and policymakers about Mr. Putin’s demand to be paid in rubles was that it would have violated sacrosanct negotiated contracts and revealed Russia’s willingness to be an unreliable business partner.
As he has tried to wield his energy clout externally, Mr. Putin has taken steps to insulate Russia’s economy from the impact of sanctions and to prop up the ruble. Few things can undermine a country as systemically as an abruptly weakened currency.
The Russia-Ukraine War and the Global Economy
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Shortages of essential metals. The price of palladium, used in automotive exhaust systems and mobile phones, has been soaring amid fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, another key Russian export, has also been rising.
Financial turmoil. Global banks are bracing for the effects of sanctions intended to restrict Russia’s access to foreign capital and limit its ability to process payments in dollars, euros and other currencies crucial for trade. Banks are also on alert for retaliatory cyberattacks by Russia.
When the allies froze the assets of the Russian central bank and sent the ruble into a downward spiral, the bank increased the interest rate to 20 percent, while the government mandated that companies convert 80 percent of the dollars, euros and other foreign currencies they earn into rubles to increase demand and drive up the price.
S&P Global survey of purchasing managers at Russian manufacturing companies showed severe declines in production, employment and new orders in March, as well as sharp price increases.
500 foreign companies have pulled up stakes in Russia, scaled back operations and investment, or pledged to do so.
“Russia does not have the capabilities to replicate domestically the technology that it would otherwise have gained from overseas,” according to an analysis by Capital Economics, a research group based in London. That is not a good sign for increasing productivity, which even before the war, was only 35 to 40 percent of the United States’.
The result is that however the war in Ukraine ends, Russia will be more economically isolated than it has been in decades, diminishing whatever leverage it now has over the global economy as well as its own economic prospects.
Energy experts said the reserve release would pack more punch if other countries, like China, also sold oil from their stockpiles. The International Energy Agency, an organization of more than 30 countries, will meet Friday and may recommend further releases from national reserves.
Russian oil exports normally represent more than one of every 10 barrels the world consumes. The United States, Britain and Canada have stopped importing Russian oil, and many oil companies and shippers in Europe have voluntarily stopped buying Russia’s energy products. That has produced a deficit so far of about three million barrels a day.
The average price of regular gasoline in the United States is $4.23 a gallon, according to AAA, the motor club. That’s about the same as it was a week ago but up 62 cents a gallon in the last month.
Oil prices had dropped this week after peace talks between Russia and Ukraine showed the first signs of progress. Energy traders are also concerned that demand could fall as China, the world’s largest oil importer, imposes lockdowns in Shanghai and other places to deal with coronavirus outbreaks.
“The price effect is likely to be short term,” David Goldwyn, who was a senior State Department official in the Obama administration, said about Mr. Biden’s announcement. “But part of the benefit of this release is that it will provide a bridge to when new physical supply comes online in the second half of this year from the U.S., Canada, Brazil and other countries.”
Some environmentalists criticized the reserve release. “Putting more oil on the market is not the solution to our problem but the perpetuation of our problem,” said Mark Brownstein, a senior vice president at the Environmental Defense Fund.
But Meghan L. O’Sullivan, director of the Geopolitics of Energy Project at Harvard’s Kennedy School, said releasing reserves to ease shortages would not imperil the transition to clean energy. “What the last month has told us is that if there is no energy security today, the appetite for taking hard steps on the path of transition will evaporate,” she said.
In the days after Russia’s invasion of Ukraine, thousands of Twitter accounts shared messages of support for Vladimir V. Putin, the Russian president.
They tried to deflect criticism of the war by comparing it to conflicts instigated by Western countries. Their commentary — along with tweets from other users who condemned it — made the hashtag #IStandWithPutin trend on Twitter in several regions around the world.
While some of the accounts said they were based in Nigeria and South Africa, the majority of those with a declared location on Twitter claimed to be from India and targeted their messages to other Indian users, researchers said.
evacuating nearly 20,000 of its citizens who were in the country when Russia’s invasion began. Hundreds of Indian students remained stuck amid heavy shelling at the time. India’s prime minister, Narendra Modi, who has avoided condemning Russia, appealed to Mr. Putin and his Ukrainian counterpart, President Volodymyr Zelensky, for help.
Russia’s local embassy used Twitter to instruct Indian media outlets to not use the word “war” but to instead refer to it as a “special military operation,” as media outlets in Russia have been forced by law to do. Some Indian Twitter users responded by mocking the embassy, while others chastised local media outlets as inept and needing instruction from Russia.
Pro-Russian sentiment has taken hold in right-wing circles in the United States, misinformation that has spread within Russia claims Ukrainians have staged bombings or bombed their own neighborhoods, and myths about Ukrainian fortitude have gone viral across social media platforms. But in India and other countries where social media users joined the hashtag, pro-Russian narratives have focused on ethnonationalism and Western hypocrisy over the war, themes that have resonated with social media users.
“There were dense clusters of communities engaging with it, many of which were based in India or based in Pakistan,” said Marc Owen Jones, an assistant professor of Middle East studies and digital humanities at Hamad Bin Khalifa University who analyzed the accounts using #IStandWithPutin.
It was not clear whether the accounts promoting pro-Putin messages in India were authentic, although Dr. Jones said some of the most popular ones engaged in suspicious behavior, like using stock photos as profile pictures or racking up likes and retweets despite having few followers.
blog post this month. “These accounts represent a wide range of attempts to manipulate the service — including opportunistic, financially motivated spam — and we don’t currently believe they represent a specific, coordinated campaign associated with a government actor.”
Russia-Ukraine War: Key Developments
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Ongoing peace talks. During peace talks between Russia and Ukraine in Istanbul, Russia promised it would “reduce military activity” near Kyiv, and Ukraine said it was ready to declare itself permanently neutral. Even so, weeks of further negotiation may be needed to reach an agreement, and Russia appears determined to capture more territory in eastern Ukraine.
On the ground. Russia’s apparent concessions in the north of Ukraine reflected a successful Ukrainian resistance that has bogged down Russia’s forces around Kyiv’s suburbs and retaken territory near the capital and cities closer to the Russian border.
New sanctions. The United States is preparing new sanctions targeting the supply chains of Russia’s military industrial sector as it seeks to erode Moscow’s ability to attack Ukraine. The new measures will be rolled out in coordination with Western allies.
But some of the accounts in India most likely belonged to real people, Dr. Jones said. “If you can get enough people spreading a message, then real people will join in,” he said. “It becomes hard to sort the organic behavior from the inorganic because it’s a mesh.”
In India, some right-wing groups have advanced similar messages. An organization called the Hindu Sena marched in support of Russia this month in the heart of India’s capital. Carrying Russian flags ordered for the occasion as well as saffron ones often flown by Hindu nationalists, participants were led by the group’s president, Vishnu Gupta.
Over 300 activists chanted, “Russia you fight on, we are with you” and “Long live the friendship of India and Russia.”
“Russia has always stood by India and is its best friend. While America supports Pakistan and does not want any Asian power to rise,” Mr. Gupta said in an interview. “We don’t believe in war. But now that it’s happening, India must go with Russia. We must make our position clear.”
Russia’s embassy in India has also used Twitter and Facebook to promote conspiracy theories about biological research labs in Ukraine and to pressure the Indian media.
largest supplier of weapons, and Ukraine by abstaining from voting against Russia at the United Nations. India has also sent medical supplies to Ukraine. It has been looking for ways to maintain its trade relations with Russia despite sanctions imposed on it by many Western countries.
But public sentiment about the war could pressure local politicians to choose a side, experts said.
“It’s a major, major flashpoint for a truly global competition for information,” Mr. Brookie said. “Its an inflection point where a number of countries — not just Russia but the United States, its allies and partners, as well as China — are positioning themselves.”
When Victoria Nuland, an under secretary of state, was questioned in the Senate this month over whether Ukraine had biological weapons, she said laboratories in the country had materials that could be dangerous if they fell into Russian hands. Jack Posobiec, a far-right commentator, insinuated on his March 9 podcast that Ms. Nuland’s answer bolstered the conspiracy theory.
“Everybody needs to come clean about what was going on in those labs, because I guarantee you the Russians are about to put all of it onto the world stage,” said Mr. Posobiec, who did not respond to calls seeking comment.
Russian officials also latched on to Ms. Nuland’s comments. “The nervous reaction confirms that Russia’s allegations are grounded,” the country’s official account for the Ministry of Foreign Affairs posted on Twitter.
Beyond the bioweapons conspiracy theory, Joseph Jordan, a white nationalist podcaster who goes by the pseudonym Eric Striker, repeated Russia’s claim that a pregnant woman who was injured in the bombing of a Ukrainian maternity hospital had faked her injuries. In his Telegram channel, Mr. Jordan told his 15,000 followers that the hospital photos had been “staged.” He did not respond to a request for comment.
Some Russians have publicly commented on what appears to be common ground with far-right Americans. Last week on the Russian state-backed news program “60 Minutes,” which is not connected to the CBS show of the same name, the host, Olga Skabeeva, addressed the country’s strengthening ties with Mr. Carlson.
“Our acquaintance, the host of Fox News Tucker Carlson, obviously has his own interests,” she said, airing several clips of Mr. Carlson’s show where he suggested the United States had pushed for conflict in Ukraine. “But lately, more and more often, they’re in tune with our own.”
In July 2012, a shell company registered in the British Virgin Islands wired $20 million to an investment vehicle in the Cayman Islands that was controlled by a large American hedge fund firm.
The wire transfer was the culmination of months of work by a small army of handlers and enablers in the United States, Europe and the Caribbean. It was a stealth operation intended, at least in part, to mask the source of the funds: Roman Abramovich.
For two decades, the Russian oligarch has relied on this circuitous investment strategy — deploying a string of shell companies, routing money through a small Austrian bank and tapping the connections of leading Wall Street firms — to quietly place billions of dollars with prominent U.S. hedge funds and private equity firms, according to people with knowledge of the transactions.
The key was that every lawyer, corporate director, hedge fund manager and investment adviser involved in the process could honestly say he or she wasn’t working directly for Mr. Abramovich. In some cases, participants weren’t even aware of whose money they were helping to manage.
asked Congress for more resources as it helps to oversee the Biden administration’s sanctions program along with a new Justice Department kleptocracy task force. And on Capitol Hill, lawmakers are pushing a bill, known as the Enablers Act, that would require investment advisers to identify and more carefully vet their customers.
Mr. Abramovich has an estimated fortune of $13 billion, derived in large part from his well-timed purchase of an oil company owned by the Russian government that he sold back to the state at a massive profit. This month, European and Canadian authorities imposed sanctions on him and froze his assets, which include the famed Chelsea Football Club in London. The United States has not placed sanctions on him.
a pair of luxury residences near Aspen, Colo. But he also invested large sums of money with financial institutions. His ties to Mr. Putin and the source of his wealth have long made him a controversial figure.
Many of Mr. Abramovich’s U.S. investments were facilitated by a small firm, Concord Management, which is led by Michael Matlin, according to people with knowledge of the transactions who were not authorized to speak publicly.
Mr. Matlin declined to comment beyond issuing a statement that described Concord as “a consulting firm that provides independent third-party research, due diligence and monitoring of investments.”
A spokeswoman for Mr. Abramovich didn’t respond to emails and text messages requesting comment.
Concord, founded in 1999, didn’t directly manage any of Mr. Abramovich’s money. It acted more like an investment adviser and due diligence firm, making recommendations to the directors of shell companies in Caribbean tax havens about potential investments in marquee American investment firms, according to people briefed on the matter.
Paycheck Protection Program loan worth $265,000 during the pandemic. (Concord repaid the loan, a spokesman said.)
Concord’s secrecy made some on Wall Street wary.
In 2015 and 2016, investigators at State Street, a financial services firm, filed “suspicious activity reports” alerting the U.S. government to transactions that Concord arranged involving some of Mr. Abramovich’s Caribbean shell companies, BuzzFeed News reported. State Street declined to comment.
American financial institutions are required to file such reports to help the U.S. government combat money laundering and other financial crimes, though the reports are not themselves evidence of any wrongdoing having been committed.
But for the most part, American financiers had no inkling about — or interest in discovering — the source of the money that Concord was directing. As long as routine background checks didn’t turn up red flags, it was fine.
Paulson & Company, the hedge fund run by John Paulson, received investments from a company that Concord represented, according to a person with knowledge of the investment. Mr. Paulson said in an email that he had “no knowledge” of Concord’s investors.
Concord also steered tens of millions of dollars from two shell companies to Highland Capital, a Texas hedge fund. Highland hired a unit of JPMorgan Chase, the nation’s largest bank, to ensure that the companies were legitimate and that the investments complied with anti-money-laundering rules, according to federal court records in an unrelated bankruptcy case.
“corporate governance services” to investment managers.
The Russia-Ukraine War and the Global Economy
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Shortages of essential metals. The price of palladium, used in automotive exhaust systems and mobile phones, has been soaring amid fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, another key Russian export, has also been rising.
Financial turmoil. Global banks are bracing for the effects of sanctions intended to restrict Russia’s access to foreign capital and limit its ability to process payments in dollars, euros and other currencies crucial for trade. Banks are also on alert for retaliatory cyberattacks by Russia.
For $15,000 a year, plus other fees, HighWater would provide an employee to sit on the board of the financial vehicle that the fund manager was expected to launch to accept the wealthy family’s money, according to emails between the fund manager and a HighWater executive reviewed by The New York Times.
The fund manager also brought on Boris Onefater, who ran a small U.S. consulting firm, Constellation, as another board member. Mr. Onefater said in an interview that he couldn’t remember whose money the Cayman vehicle was managing. “You’re asking for ancient history,” he said. “I don’t recall Mr. Abramovich’s name coming up.”
The fund manager hired Mourant, an offshore law firm, to get the paperwork for the Cayman vehicle in order. The managing partner of Mourant did not respond to requests for comment.
He also hired GlobeOp Financial Services, which provides administration services to hedge funds, to ensure that the Cayman entity was complying with anti-money-laundering laws and wasn’t doing business with anyone who had been placed under U.S. government sanctions, according to a copy of the contract.
“We abide by all laws in all jurisdictions in which we do business,” said Emma Lowrey, a spokeswoman for SS&C Technologies, a financial technology company based in Windsor, Conn., that now owns GlobeOp.
John Lewis, a HighWater executive, said in an email to The Times that his firm received four referrals from Concord from 2011 to 2014 and hadn’t dealt with the firm since then.
“We were aware of no links to Russian money or Roman Abramovich,” Mr. Lewis said. He added that GlobeOp “did not identify anything unusual, high risk, or that there were any politically exposed persons with respect to any investors.”
The Cayman fund opened for business in July 2012 when $20 million arrived by wire transfer. The expectation was that tens of millions more would follow, although additional funds never showed up. The Cayman fund was run as an independent entity, using the same investment strategy — buying and selling exchange-traded funds — employed by the fund manager’s main U.S. hedge fund.
The $20 million was wired from an entity called Caythorpe Holdings, which was registered in the British Virgin Islands.
Documents accompanying the wire transfer showed that the money originated with Kathrein Privatbank in Vienna. It arrived in Grand Cayman after passing through another Austrian bank, Raiffeisen, and then JPMorgan. (JPMorgan was serving as a correspondent bank, essentially acting as an intermediary for banks with smaller international networks.)
A spokesman for Kathrein declined to comment. A spokeswoman for JPMorgan declined to comment. Representatives for Raiffeisen did not respond to requests for comment.
The fund manager noticed that some of the documentation was signed by a lawyer named Natalia Bychenkova. The Russian-sounding name led him to conclude that he was probably managing money for a Russian oligarch. But the fund manager wasn’t bothered, since GlobeOp had verified that Caythorpe was compliant with know-your-customer and anti-money-laundering rules and laws.
He didn’t know who controlled Caythorpe, and he didn’t ask.
In early 2014, after Russia invaded the Ukrainian region of Crimea, markets tanked. The fund manager made a bearish bet on the direction of the stock market, and his fund got crushed when stocks rallied.
The next year, Caythorpe withdrew its money from the Cayman fund. Caythorpe was liquidated in 2017.
The fund manager said he didn’t realize until this month that he had been investing money for Mr. Abramovich.
Susan C. Beachy and Kitty Bennett contributed research. Maureen Farrell contributed reporting.
“For the moment I do plan to work in Russia,” he said. “How this may change in the future, especially if YouTube will be blocked, I don’t know.”
Unlike China, where domestic internet companies have grown into behemoths over more than a decade, Russia does not have a similarly vibrant domestic internet or tech industry.
Russia-Ukraine War: Key Things to Know
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Protests in Russia. Amid antiwar rallies across Russia, the police said more than 3,000 people were arrested Sunday, the highest nationwide total in any single day of protest in recent memory. An activist group that tracks arrests reported detentions in 49 different Russian cities.
So as it is cordoned off into its own digital ecosystem, the fallout may be severe. In addition to access to independent information, the future reliability of internet and telecommunications networks, as well as the availability of basic software and services used by businesses and government, is at risk.
Already, Russian telecom companies that operate mobile phone networks no longer have access to new equipment and services from companies like Nokia, Ericsson and Cisco. Efforts by Russian companies to develop new microprocessors were in doubt after Taiwan Semiconductor Manufacturing Company, the largest maker of essential semiconductors, halted shipments to the country. Yandex, Russia’s largest internet company, with a search engine more widely used than Google in Russia, warned it might default on its debts because of the crisis.
“The whole IT, hardware and software market that Russia relies on is gravely damaged right now,” said Aliaksandr Herasmenka, a researcher at the University of Oxford’s program on democracy and technology. The Russian authorities could respond by loosening rules that have made it illegal to download pirated software, he said.
The Ukrainian government has also pressured internet service providers to sever access in Russia. Officials from Ukraine have asked ICANN, the nonprofit group that oversees internet domains, to suspend the Russian internet domain “.ru.” The nonprofit has resisted these requests.
Denis Lyashkov, a self-taught web developer with more than 15 years of experience, said Russia’s censorship campaign was “devastating” for those who had grown up with a less restricted internet.
“If they don’t comply with the U.S., they’re in trouble with the U.S., but if they don’t comply with China, they could also face penalties in China,” he said.
Of course, collecting fines from companies that are unwilling to pay and monitoring whether businesses comply with the rules could be difficult, Mr. Chorzempa added. “It’s already proving difficult to monitor the things that are already controlled, and if you expand that list, that’s going to be a real challenge to verify what’s going to Russia,” he said.
Russia’s Attack on Ukraine and the Global Economy
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A rising concern. Russia’s attack on Ukraine could cause dizzying spikes in prices for energy and food and could spook investors. The economic damage from supply disruptions and economic sanctions would be severe in some countries and industries and unnoticed in others.
The cost of energy. Oil prices already are the highest since 2014, and they have risen as the conflict has escalated. Russia is the third-largest producer of oil, providing roughly one of every 10 barrels the global economy consumes.
Gas supplies. Europe gets nearly 40 percent of its natural gas from Russia, and it is likely to be walloped with higher heating bills. Natural gas reserves are running low, and European leaders have accused Russia’s president, Vladimir V. Putin, of reducing supplies to gain a political edge.
Shortages of essential metals. The price of palladium, used in automotive exhaust systems and mobile phones, has been soaring amid fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, another key Russian export, has also been rising.
Financial turmoil. Global banks are bracing for the effects of sanctions designed to restrict Russia’s access to foreign capital and limit its ability to process payments in dollars, euros and other currencies crucial for trade. Banks are also on alert for retaliatory cyberattacks by Russia.
The Biden administration’s export controls apply to goods produced in any country as long as they use U.S. technology — including chip makers like Taiwan Semiconductor Manufacturing Company and the Shanghai-based Semiconductor Manufacturing Industry Corporation.
Both of those companies continue to rely on the United States for certain components and manufacturing technology, said Gabriel Wildau, a managing director at Teneo, a consulting firm. If they continue supplying to Russia, SMIC and other Chinese companies could be cut off from U.S. technology, the same kind of penalty that crippled Huawei. On Friday, Taiwan Semiconductor said it was committed to complying with the export controls.
“If Beijing is viewed as Moscow’s enabler, pressure will rise in the U.S. Congress to extend these restrictions,” Mr. Wildau wrote in a note to clients. Beijing would also face the risk that other major technology exporters, like Japan, South Korea and the Netherlands, “would adopt Washington’s tougher line,” he said.
China’s state-owned banks could also face risks for continuing to lend to Russia. China and Russia have been settling more of their trade using the renminbi and the ruble. Beijing has also been trying to develop the digital use of its currency as an alternative to the dollar, which could help Russia limit the effect of financial sanctions.
But Chinese banks are still deeply reliant on the U.S. dollar. While major Chinese banks already appeared to be pulling back their financing for Russia, Mr. Wildau said, Beijing could choose to support Russia using smaller state-owned banks that don’t do a lot of international business that requires the use of the dollar.
After getting battered by the pandemic, supply chain chokeholds and leaps in prices, the global economy is poised to be sent on yet another unpredictable course by an armed clash on Europe’s border.
Even before the Kremlin ordered Russian troops into separatist territories of Ukraine on Monday, the tension had taken a toll. The promise of punishing sanctions in return by President Biden and the potential for Russian retaliation had already pushed down stock returns and driven up gas prices.
An outright attack by Russian troops could cause dizzying spikes in energy and food prices, fuel inflation fears and spook investors, a combination that threatens investment and growth in economies around the world.
However harsh the effects, the immediate impact will be nowhere near as devastating as the sudden economic shutdowns first caused by the coronavirus in 2020. Russia is a transcontinental behemoth with 146 million people and a huge nuclear arsenal, as well as a key supplier of the oil, gas and raw materials that keep the world’s factories running. But unlike China, which is a manufacturing powerhouse and intimately woven into intricate supply chains, Russia is a minor player in the global economy.
spikes in heating and gas bills, which are already soaring. Natural gas reserves are at less than a third of capacity, with weeks of cold weather ahead, and European leaders have already accused Russia’s president, Vladimir V. Putin, of reducing supplies to gain a political edge.
United Nations report. Russia is the world’s largest supplier of wheat, and together with Ukraine, accounts for nearly a quarter of total global exports. For some countries, the dependence is much greater. That flow of grain makes up more than 70 percent of Egypt and Turkey’s total wheat imports.
This will put further strain on Turkey, which is already in the middle of an economic crisis and struggling with inflation that is running close to 50 percent, with skyrocketing food, fuel and electricity prices.
And as usual, the burden falls heaviest on the most vulnerable. “Poorer people spend a higher share of incomes on food and heating,” said Ian Goldin, a professor of globalization and development at Oxford University.
Ukraine, long known as the “breadbasket of Europe,” actually sends more than 40 percent of its wheat and corn exports to the Middle East or Africa, where there are worries that further food shortages and price increases could stoke social unrest.
Lebanon, for example, which is experiencing one of the most devastating economic crises in more than a century, gets more than half of its wheat from Ukraine, which is also the world’s largest exporter of seed oils like sunflower and rapeseed.
On Monday, the White House responded to Mr. Putin’s decision to recognize the independence of two Russian-backed territories in the country’s east by saying it would begin imposing limited sanctions on the so-called Donetsk and Luhansk People’s Republics. Jen Psaki, the White House press secretary, said Mr. Biden would soon issue an executive order prohibiting investment, trade and financing with people in those regions.
range of scenarios from mild to severe. The fallout on working-class families and Wall Street traders depends on how an invasion plays out: whether Russian troops stay near the border or attack the Ukrainian capital, Kyiv; whether the fighting lasts for days or months; what kind of Western sanctions are imposed; and whether Mr. Putin responds by withholding critical gas supplies from Europe or launching insidious cyberattacks.
“Think about it rolling out in stages,” said Julia Friedlander, director of the economic statecraft initiative at the Atlantic Council. “This is likely to play out as a slow motion drama.”
As became clear from the pandemic, minor interruptions in one region can generate major disruptions far away. Isolated shortages and price surges— whether of gas, wheat, aluminum or nickel — can snowball in a world still struggling to recover from the pandemic.
“You have to look at the backdrop against which this is coming,” said Gregory Daco, chief economist for EY-Parthenon. “There is high inflation, strained supply chains and uncertainty about what central banks are going to do and how insistent price rises are.”
at 7.5 percent in January, and is expected to start raising interest rates next month. Higher energy prices set off by a conflict in Europe may be transitory but they could feed worries about a wage-price spiral.
“We could see a new burst of inflation,” said Christopher Miller, a visiting fellow at the American Enterprise Institute and an assistant professor at Tufts University.
Also fueling inflation fears are possible shortages of essential metals like palladium, aluminum and nickel, creating another disruption to global supply chains already suffering from the pandemic, trucker blockades in Canada and shortages of semiconductors.
The price of palladium, for example, used in automotive exhaust systems, mobile phones and even dental fillings, has soared in recent weeks because of fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, used to make steel and electric car batteries, has also been jumping.
Understand How the Ukraine Crisis Developed
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Failed diplomatic efforts. The United States, NATO and Russia have been engaged in a whirlwind of diplomacy to prevent an escalation of the conflict. In December, Russia put forth a set of demands, including a guarantee that Ukraine would never join NATO. The West dismissed those demands and threatened economic consequences.
It’s too early to gauge the precise impact of an armed conflict, said Lars Stenqvist, the chief technology officer of Volvo, the Swedish truck maker. But he added, “It is a very, very serious thing.”
“We have a number of scenarios on the table and we are following the developments of the situation day by day,” Mr. Stenqvist said Monday.
The West has taken steps to blunt the impact on Europe if Mr. Putin decides to retaliate. The United States has ramped up delivery of liquefied natural gas and asked other suppliers like Qatar to do the same.
negotiations to revive a deal to curb Iran’s nuclear program. Iran, which is estimated to have as many as 80 million barrels of oil in storage, has been locked out of much of the world’s markets since 2018, when President Donald J. Trump withdrew from the nuclear accord and reimposed sanctions.
Some of the sanctions against Russia that the Biden administration is considering, such as cutting off access to the system of international payments known as SWIFT or blocking companies from selling anything to Russia that contains American-made components, would hurt anyone who does business with Russia. But across the board, the United States is much less vulnerable than the European Union, which is Russia’s largest trading partner.
Americans, as Mr. Biden has already warned, are likely to see higher gasoline prices. But because the United States is itself a large producer of natural gas, those price increases are not nearly as steep and as broad as elsewhere. And Europe has many more links to Russia and engages in more financial transactions — including paying for the Russian gas.
Oil companies like Shell and Total have joint ventures in Russia, while BP boasts that it “is one of the biggest foreign investors in Russia,” with ties to the Russian oil company Rosneft. Airbus, the European aviation giant, gets titanium from Russia. And European banks, particularly those in Germany, France and Italy, have lent billions of dollars to Russian borrowers.
“Severe sanctions that hurt Russia painfully and comprehensively have potential to do huge damage to European customers,” said Adam Tooze, director of the European Institute at Columbia University.
Depending on what happens, the most significant effects on the global economy may manifest themselves only over the long run.
economic ties to China. The two nations recently negotiated a 30-year contract for Russia to supply gas to China through a new pipeline.
“Russia is likely to pivot all energy and commodity exports to China,” said Carl Weinberg, chief economist at High Frequency Economics.
The crisis is also contributing to a reassessment of the global economy’s structure and concerns about self-sufficiency. The pandemic has already highlighted the downsides of far-flung supply chains that rely on lean production.
Now Europe’s dependence on Russian gas is spurring discussions about expanding energy sources, which could further sideline Russia’s presence in the global economy.
“In the longer term, it’s going to push Europe to diversify,” said Jeffrey Schott, a senior fellow working on international trade policy at the Peterson Institute for International Economics. As for Russia, the real cost “would be corrosive over time and really making it much more difficult to do business with Russian entities and deterring investment.”
Kuwait announced last month that it planned to invest more than $6 billion in exploration over the next five years to increase production to four million barrels a day, from 2.4 million now.
This month, the United Arab Emirates, a major OPEC member that produces four million barrels of oil a day, became the first Persian Gulf state to pledge to a net zero carbon emissions target by 2050. But just last year ADNOC, the U.A.E.’s national oil company, announced it was investing $122 billion in new oil and gas projects.
Iraq, OPEC’s second-largest producer after Saudi Arabia, has invested heavily in recent years to boost oil output, aiming to raise production to eight million barrels a day by 2027, from five million now. The country is suffering from political turmoil, power shortages and inadequate ports, but the government has made several major deals with foreign oil companies to help the state-owned energy company develop new fields and improve production from old ones.
Even in Libya, where warring factions have hamstrung the oil industry for years, production is rising. In recent months, it has been churning out 1.3 million barrels a day, a nine-year high. The government aims to increase that total to 2.5 million within six years.
National oil companies in Brazil, Colombia and Argentina are also working to produce more oil and gas to raise revenue for their governments before demand for oil falls as richer countries cut fossil fuel use.
After years of frustrating disappointments, production in the Vaca Muerta, or Dead Cow, oil and gas field in Argentina has jumped this year. The field had never supplied more than 120,000 barrels of oil in a day but is now expected to end the year at 200,000 a day, according to Rystad Energy, a research and consulting firm. The government, which is considered a climate leader in Latin America, has proposed legislation that would encourage even more production.
“Argentina is concerned about climate change, but they don’t see it primarily as their responsibility,” said Lisa Viscidi, an energy expert at the Inter-American Dialogue, a Washington research organization. Describing the Argentine view, she added, “The rest of the world globally needs to reduce oil production, but that doesn’t mean that we in particular need to change our behavior.”
