Economic Fallout Spreads as Ukraine War Drags On

Industries across the board, the stability of which many have taken for granted, are starting to wobble.

MasterCard and Visa are suspending their operations in Russia, the companies said March 5, 2022. AP/Mark Lennihan, file

ATHENS — The economic fallout of Vladimir Putin’s war on Ukraine will be felt for years to come, and the list of financial consequences is growing by the day. “Soaring gas costs threaten to close down industries across Europe,” one terse headline in London’s Sunday Telegraph reads. “Pig farmers warn war risks forcing them out of business,” says another. 

In the Financial Times, it’s, “Invasion throttles supply of gases for chip production,” on top of, “Shale oil boss doubts US can replace Russia oil,” and — hold on to that sandwich — “Wheat hits record high as war halts exports from Europe’s bread basket.” In that article, it is noted that nearly a third of the world’s wheat exports have now been completely cut off from the global market. 

Back to those pigs for a minute — the ones in England, not the Russian leaders whom the Ukrainians could with some justification designate as such. The bigger point is that industries across the board, the stability of which many have taken for granted, are starting to wobble. According to that article, the war has pushed up the price of animal feed so high that British farmers are now losing north of $650,000 a week, risking a collapse of the pork industry by the summer. Seems that as the “Continent fights to bolster gas stores before next winter,” as another headline goes, some might want to stock up on their bacon while it’s still affordable and available. 


The repercussions of the war are flying thick and fast and across virtually every industry, including travel. Russia’s closure of its airspace to Western aviation, a retaliatory measure that followed the prohibition of Russian flights over British and most EU member skies, has left 980 foreign-owned jets trapped in Russia, the Telegraph reports, tying up $10 billion of Western capital. The unfortunately named Wizz Air, the only EU airline with a base in Ukraine, now has four of its planes stuck there, leading to the most obvious economic headline of the day, courtesy the Evening Standard: “Wizz Air cuts growth targets after axing flights to Russia and Ukraine.”

Southern European countries that were banking on Russians coming this summer to help offset tourist receipts battered by two years of pandemic cautions are in a tailspin. 

On the one hand, countries such as Greece and Cyprus will have to actively court alternative markets, even if Russians as a whole were never the highest-spending travelers (Americans typically spend the most abroad).  On the other, soaring energy costs have already caused hotels to shutter in Italy and could push many in Greece to the brink of insolvency, Greek newspaper Kathimerini reports. Some Americans may be giving second thoughts to taking trips to Europe, with Forbes reporting cancellations of trips in countries including Poland, Croatia, the Czech Republic, and others in Eastern Europe. 


Another unanticipated consequence of the war is major American corporations giving the cold shoulder to Moscow, with the effects on share prices yet to be seen. 

Microsoft Corporation announced its intention to halt all sales of its products in Russia, on the heels of Apple doing so. American Express is the latest American company to suspend operations in Russia and Belarus. 

“In light of Russia’s ongoing, unjustified attack on the people of Ukraine, I want to update you on the actions we have taken to support our colleagues and customers in the region and provide humanitarian aid to those suffering the effects of this terrible war,” the company’s chairman and CEO, Stephen J. Squeri, shared in a memo. One action is that globally issued American Express cards will no longer work at merchants or ATMs in Russia.


Preemptively removing the reputational harm of doing business with Russia right now by pulling out of the country altogether could ultimately pay dividends in the U.S. market, but may unwittingly play into Vladimir Putin’s hands in the short-term, offering fodder for his well-greased anti-Western propaganda machine. But the economic vise tightening around Russia thanks to what amounts to private-sector sanctions will have a broad-range of effects. 

French luxury group LVMH, whose brands include Louis Vuitton, will close its 124 stores in Russia “temporarily,” Reuters reports. Harrods has halted deliveries to Russia. Even supposing Russians could still afford Western luxury goods, with deactivated credit cards and a run on rubles, it seems there would be almost no way to pay for them. Who will buy them instead?

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