If Russia Goes Over the Economic Cliff, It Won’t Go Alone

By Rob Garver 12 hours ago

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If Russia Goes Over the Economic Cliff, It Won’t Go Alone

Secretary of State John Kerry last month tried to explain the complexity of the decision-making process surrounding sanctions on Russia. The U.S. and E.U. have already announced very targeted sanctions against Russia as a penalty for its takeover of Ukraine’s Crimean peninsula and it’s threatening posture toward eastern Ukraine.

However, what’s been implemented so far is only a taste of what a full-on sanctions regime, such as the one imposed against Iran, might mean for the Russian economy. But in testimony before Congress last month, Kerry noted that Russia is a major player in the world economy, and said that damaging the Russian economy will also have effects on U.S. businesses operating in Russia and on U.S. exports.
Related: 12 Things You Didn’t Know About Ukraine
“If you start going down that road, it’s not just them who feel it, we’ll feel it too,” he said.
Of course, some will feel it more than others, and the irony here is that the more pressure the U.S. and its allies put on the Russian economy, the more damage it is likely to do to the countries most concerned about Russian aggression.
For argument’s sake, assume the Russian economy goes into severe recession and, as a result, demand for imports drops. According to data collected by the Massachusetts Institute of Technology’s Observatory of Economic Complexity, the likely impact on the U.S. would be minimal. As of 2011, the most recent data available, less than one percent of total U.S. exports went to Russia.
By contrast, some of Russia’s closest neighbors – and those most concerned about Russian President Vladimir Putin’s posture toward his former Soviet Republics – also happen to be major trade partners with the Russian Federation.
Related: For Putin, Invading Ukraine Augurs Russia’s Destiny
Ukraine’s relationship with Russia has, obviously, been dramatically altered. But as of 2011, Russia accounted for 27 percent of Ukraine’s exports. Moldova, which many believe to be a potential target for Putin, sent 26 percent of its exports to Russia.
Ukraine’s northern neighbor, Belarus, stands to lose more than any other country should Russia cut back dramatically on imports, as 32 percent of its exports go there.
But the impact extends well beyond countries immediately within the Russian sphere of influence.
Estonia, Latvia, and Lithuania, three former Soviet Republics that are now part of the North Atlantic Treaty Organization (NATO), are likely in no danger of Russian invasion because of the treaty obligations that commit the U.S. and other major power to their defense. However, Latvia relies on Russia as a customer for nine percent of its exports, and Lithuania and Estonia each send 14 percent of their exports to the Russian Federation.
Related: Russia’s Military Bear Is a Paper Tiger
Major European powers also smaller, but non-trivial, levels of exports to Russia. Germany and Italy send 3 percent of their exports there, and France sends two percent. Not huge numbers, but in the difficult economy Europe is facing, even small declines in demand can have a real impact.
The likelihood that further sanctions will have an impact is hard to deny. In a report issued Tuesday, the International Monetary Fund said the Russian economy has run into a brick wall as a result of the crisis in Ukraine.
“The Russian economy, already slowing because of pre-existing structural bottlenecks, has been further affected by geopolitical uncertainties arising from conflict between Russia and Ukraine,” the report said. “Growth is expected to ease to 0.2 percent in 2014, with considerable downside risks.”
Further, the IMF said, “In 2014, Russia’s growth is expected to continue its slowing trend to 0.2 percent, from 1.3 percent in 2013. Investment will further contract due to the uncertainty around the geopolitical situation. Capital outflows increased significantly in Q1 2014 to US$ 51 billion.”

Additional sanctions on Russia will no doubt increase the pressure and the pain on Putin. But neither will be limited to the country the sanctions target.

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View Comments (427)

end quote from:

http://news.yahoo.com/russia-goes-over-economic-cliff-100000334.html

I also wrote about this problem in the following article:

 Will Putin's escapade into Ukraine throw the world...

If the collapse happened this would be the most likely progression. Sanctions from the U.S. and Europe bite. Then a Russian Banking system (too big to fail) collapses destroying completely the Russian economy for good. (There would be no known way to repair this save ending capitalism) which might be what Putin wants anyway.

However, this would create an economic disaster of epic proportions that could crash first Germany, then France and Italy and Spain (because of their economic ties to Germany). Britain would be affected too but not as much as the rest of the EU which likely would tank along with the Euro. With the Euro gone countries would be on their own again and there would be incredible anger against Russia (for what Putin had created) and against the U.S. and the EU because of the sanctions and this anger might eventually result in some wars too. Because China likely would tank unless it's domestic economic demands were enough now to keep it afloat much like the U.S. was between about 1950 and 2001.

So, out of this Russia, the EU and possibly Britain and even the U.S. and rest of the world might be thrown into a Great Depression that would be so bad that the last one would be silly in comparison. Because what I can presently see could actually happen might take out 1/2 the population of earth within 20 years from starvation.

However, the good news is that because I wrote about what could happen people likely will prevent this from happening because who wants to live in a world with 3 billion people starving to death at once? That would be horrific beyond any movie you might have ever seen. And that is saying something.

However, there is another way to look at this. 

It is only a matter of time before some catastrophe or group of catastrophes takes out 1 billion to 3 billion people or more. It is now not just IF it is only When. So, this when could be anytime in the next 500 years and could be from war, global warming, global climate change, starvation, droughts or any combination of the above or something you and I don't even know the name of yet.