Harvard economist Jason Furman said Russia’s economy is ‘unimportant’ except for its gas resources, The New York Times reported.
His comments come as the US and Europe prepare heavy sanctions on Russia if it invades Ukraine.
But there are concerns that their plans to punish Moscow will penalize the rest of the world too.
Russia’s economy is “incredibly unimportant in the global economy except for oil and gas,” Jason Furman, Harvard economist and ex-adviser to former President Barack Obama, told The New York Times.
“It’s basically a big gas station,” he said.
His comments come as the West prepares heavy sanctions on Russia if it invades Ukraine. While they have the potential to throw the entire Russian economy into chaos, these measures could also reverberate to further damage the US, Europe, and the rest of the world as they battle inflation and rising energy prices — a ripple effect that the West hopes to mitigate.
On Monday, Moscow declared the independence of two breakaway regions of Ukraine and sent troops there — escalating the prospect of a major war. President Joe Biden has already ordered sanctions on the separatist regions — Donetsk and Luhansk — prohibiting US citizens from engaging in any exports, imports, or new investments in these areas.
Despite Russia’s size and wealth in raw materials, its economy is more on-par with Brazil than with nations like Germany, France, and the UK, according to the latest nominal GDP data from the World Bank. According to the World Bank, its economy is weaker than Italy’s and South Korea’s, two nations with less than half of Russia’s population.
But as Furman notes, Russia’s oil and gas exports are significant to the world.
The European Union imports around 80% of the natural gases it uses, according to the US Energy Information Administration, and Russia accounts for 41% of the natural gas imports and 27% of the oil imports in the continent, per Eurostat.
Compounded with energy prices in the EU surging in price from 20 euros to 180 euros a megawatt-hour over the last year, the disappearance of those gas and oil imports could spell disaster for the region and the interconnected global economy. Meanwhile, in the US, gas prices have hit a seven-year high, climbing to around $3.50 per gallon, while inflation burgeons at its highest rate in 40 years, at 7.5%.
On the other hand, Ukraine has also been a major supplier of grain to other regions, sending 40% of its wheat and corn exports to the Middle East and Africa, The Times reported.
In response to a potential food crisis in those regions, US Secretary of Agriculture Tom Vilsack said on Saturday that American farmers would increase production and “step in and help our partners,” the Associated Press reported.
Ukraine accounts for 12% of the entire world’s grain exports, and is estimated to provide 16% of global corn exports this year, the AP reported. Vilsack told the outlet he believed that American consumers would largely be unaffected, but Europeans would face “a different story.”
“You have to look at the backdrop against which this is coming,” Gregory Daco, chief economist for consulting firm EY-Parthenon, told The Times. “There is high inflation, strained supply chains and uncertainty about what central banks are going to do and how insistent price rises are.”
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