Daily Times

In what has been a tough week–for what is the third week of the Russian invasion of Ukraine–Global Demands and Supplies are at a standstill. From the smartphone industry to the energy sector, different ideas are shaping this halt of trade between countries that see Russia at the very top of their supply chain.

Russia, a major oil-producing country, is already feeling the effects of sanctions. These consist of both embargoes and delays in purchases to their oil and natural gas reserves following multiple sanctions on Russia, and its allies. The United States has announced a full-fledged embargo on Russian energy.

In light of these events, the European Union also announced its intention to divorce itself from Russian reliance on its energy sector. The Executive Vice-President for the European Green Deal, Frans Timmermans has said about this, “It is time we tackle our vulnerabilities and rapidly become more independent in our energy choices.”

This embargo is to help deduct Russian energy from the equation of the global economy and use the idea of its perishability to demolish its economy. Russia has already announced a 20 per cent interest rate; accounting for its more than an extraordinary burden.

According to the International Energy Agency, 2021 was a representative year in the atypical Global Demand for oil prices. The demand lay at -2.3 mb/d in Quarter 3 of last year’s depiction of the top four nations in determination.

With fewer investments in the country, Russia’s already crumbling economy could be on the road to disaster.

A further dip into oil prices and the oil demand can shock investors, not just in Russia or the eastern NATO alliance, but globally. The world relies heavily upon OPEC nations and requires complete stability in order to produce effective price-demand spectrums, and eventually an involuntary Buffer stock. This buffer stock could take huge advantages of consumers well after the war, signalling a downturn in world economic standards.

Reserves that the country had secured for over a decade (about 315 million dollars) have been frozen. This fabricated depletion could very well cause a default. Many firms have already added their intention to move out of the region, and more could soon join in.

A default is when an entity, an economy or a business is unable to repay its debts on time. It can also account for evasion of debt, and cause a debt ceiling to skyrocket. Basically, with fewer investments in the country, Russia’s already crumbling economy could be on the road to disaster.

International banks, including those in the US, France, Austria, and Italy, are accounted for the 100 billion dollar price debt that the Russian government owes them.

The director of the IMF program has also removed the possibility of this default being “improbable.”

Its foreign exchange rate reserves have also been frozen, decreasing its demand hits the price. Russian bonds, due in a year, have come down to 30 cents, while those due in 11 years have fallen from 130 cents in January to five cents in mid-march.

The global sovereign debt, at 450 Billion Dollars, has been an efficient description of what this economic repulsion means. The Russian government needs to re-pay its debt and satisfy the supply for Eurobonds. If not so, then sanctions must be lifted to avoid a double deal recession.

If Russia chose to repay the dollars, Q2 growths could look up, and despite sanctions, this crisis can be overcome. If it doesn’t pay at all, whether, in the Russian ruble or the US dollar, it will be in debt, with minimal investments until the war ends itself. Even if it chooses to pay, but pay in rubles and decrease the money supply, default is likely and such volatility between economic declines and debt crashes are no options for investors to consider.

And then we have the chance of a bond default i.e. if the treasury cannot produce payment for promised interest rates for a given amount of bonds.

This will have an impact on the people, forcing them to either halt demand for cash in circulation, or just panic buy in general. With constant rates of inflation looming, Russia has a choice to make, between its people and its people’s wellbeing.

This cannot be classified as depression because depression is always seen in the long-term, but with an effective end in sight. A decline is a cornered road heading to disaster, where the only place to go is up. To fly!

The writer is a freelance columnist.