MNCs should continue to prepare contingency plans for an uptick in hostilities in the broader confrontation between the West and Russia, leading to possibly harsher sanctions against Russia, which is seen as ultimately responsible. Aside from the negative fallout for Belarus and Ukraine, far more impactful would be ruble depreciation, which would be even more worrying now, as price growth is already high and expected to remain elevated for most of 2022. Added currency pressure would have a tangible impact on demand.
Overview
In response to the combat death of a Ukrainian solider, Ukraine used a Turkish-made drone to strike a position in the separatist-controlled region of the Donbas near the conflict line, marking a notable advancement in the technology used in the conflict. Subsequently, Russian troops and materiel (tanks, missiles, and military trucks) movements toward the Ukrainian border were observed. Separately, some 4,000 Middle Eastern migrants were flown into Belarus and escorted by authorities to the Polish and Lithuanian borders, exacerbating the months-old migrant crisis. Top security advisers of the US and Russia met in Moscow as the two countries continue senior-level communication following the June Geneva Summit between Biden and Putin.
Our View
Events like these serve as a cautionary reminder of the consistent latent potential for a rise in hostilities between the West and Russia in numerous areas, including Ukraine and Belarus, that, in turn, threaten harsher sanctions against both Belarus (expected later this month) and Russia. Worryingly, the timing may be important with Europe mired in its gas crisis in which Russia holds considerable leverage, offering Moscow potentially more latitude to escalate tensions with the West. Ultimately, regarding Ukraine, the Kremlin is counterbalancing Ukraine’s use of drones by reinforcing the separatist areas in order to avoid further destabilization and keep the conflict at an impasse. With regard to Belarus, Lukashenko will continue to pressure the EU until punished severely enough by the EU or otherwise restrained by Moscow, neither of which is likely in the near future, ensuring a continuation of the crisis. Amid such tense relations, vital, high-level US-Russian contact should help avoid miscommunication and an unnecessary escalation of hostilities.
At FrontierView, our mission is to help our clients grow and win in their most important markets. We provide the research, data, and insights you need to outperform the competition. Subscribe to our weekly newsletter The Lens published by our Global Economics and Scenarios team which highlights high-impact developments and trends for business professionals. For full access to our offerings, start your free trial today and download our complimentary mobile app, available on iOS and Android.