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Watch local economics as Ukraine-Russia crisis persists

March 4, 2014

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Trader watches as the market reacts to threats of economic and diplomatic sanctions to “isolate” Russia. Photo: BusinessInquirer.net

As a business writer, you might not have had the escalating military and political crisis in the Ukraine on your to-do radar screen, but as the Russian invasion continues, it’s begun to cause  market gyrations around the world.

At this point it’s worth paying attention to what’s going on and perhaps lining up some explanatory stories that will help your readers make sense of any potential economic impact.

Here’s an up-to-date primer from ABC News, if you need a refresher on what’s happening between Russian and the Ukraine, which is a former Soviet state that emerged as a sovereign nation when the U.S.S.R. broke up in 1991.

Volatility in the stock markets, which already have put in a jittery first two months of 2014, might be the first concern of your audience.  As CNBC reports, Monday was the worst day in a month for the Dow Jones industrial average and the Standard & Poor’s 500; the Dow fell 250 points for a time and the S&P, which just last week closed at a record peak, also fell.  MarketWatch rushed out a column headlined “Where to put your money if war breaks out in Ukraine;”  I’m not sure that average audiences are served by the notion of jerking funds in and out of retirement accounts in response to volatility.  That’s how a lot of people lost their nest eggs after the last recession, while those who subscribed to a buy-and-hold strategy are doing better than before.  So this ins’t a bad time to ask some certified financial planners to review what investors — particularly ordinary retirement savers in 401(k)s and the like, who don’t have time to be students of the market — should and should not do with their existing accounts when indexes heave day-to-day. A sidebar on the principle of dollar-cost-averaging might not be amiss, either.

Future money might be attracted to safer havens than stocks; gold bugs no doubt are happy as the crisis pushes that precious metal to its highest close in four months, according to Bloomberg.  Some people really do feel better with a little gold and silver tucked away; I’d check out business at coin shops, pawn shops, jewelers and the like to gauge any sales uptick in response to negative news from overseas.

Fuel is another concern; European markets already are very worried about the supply of oil and gas, for which they depend on Russia’s state-run petroleum industry.  Bloomberg reports that the military action may be “stoking” gas and oil prices while CNBC points out that a recent 12-cent rise in U.S. gas prices is in response not only to the Ukraine situation but to political crises in Sudan and Venezuela as well.

Should the U.S. implement economic sanctions in an effort to curb Russia’s actions, there will be a ripple effect for the American economy, though who knows to what extent. Politico reports that the U.S. Chamber of Commerce is speaking out against sanctions and notes that American companies have $10 billion invested in Russia, particularly in mining, banking and manufacturing sectors.  You might want to survey your area’s multinational firms about potential fallout to them should curbs be enacted.

Here are montly U.S-Ukraine trade figures from the U.S. Census Bureau; this country is a net exporter to the Ukraine — according to this fact sheet from the Office of the U.S. Trade Representative, the Ukraine is a mddle-sized market for agricultural products, a lot of eggs, poultry and red meat and some fuels.  So if you’re in a predominantly agricultural economy, it might be interesting to find out whether your area’s producers have any stake in the Ukraine market.


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