A sign in Moscow displays currency exchange rates. Unpredictable economic consequences followed Russia’s invasion of Ukraine in February.Credit: Andrey Rudakov/Bloomberg via Getty
When Russia invaded Ukraine on 24 February, nobody expected that the United States, the European Union, the United Kingdom, Japan, Canada and other nations would isolate Russia from the global economy in retaliation. Instead of limited and largely symbolic sanctions, which were all Russia faced when it annexed Crimea and occupied eastern parts of Ukraine in 2014, this latest response has had devastating ripple effects.
Key Russian banks have been denied access to the US dollar, foreign reserves and the Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging system, which banks use to relay financial information to each other. The United States and its allies blocked the export of high-end semiconductors to Russia’s technology and defence sectors, as well as software, oil- and gas-refining equipment and other items. As one US law firm put it, it is now illegal to knowingly supply a toothbrush to a company that occasionally helps to repair Russian military equipment.
Russia’s economy is reeling. The value of Ukraine’s currency, the hryvnia, has been knocked flat by the war. No one knows what will unfold.
The biggest surprise is how this has been done — by weaponizing the networks that bind the global economy together. Financial and supply networks have chokepoints, which powerful states can use to punish individuals, businesses and even nations. Some of these points are known; many have yet to be identified.
There has been too little academic study of these pressure points, however. Policymakers lack the necessary data to make informed decisions. Companies hold information on supply chains close; governments and the public don’t have an overview. Data on financial and information networks and their vulnerabilities are similarly patchy.
