Indifferent Euro-zone and Russian arrogance – BY Dr. BOBBY SRINIVASAN AND Dr. SUDHAKAR BALACHANDRAN

September 1, 2014 | Posted by bobbysrinivasan << back to blog

The shooting down of Malaysia airlines MH17 is a catastrophe of different category. It was a heinous act of crime perpetrated by the so called Russian rebels, of course, fully supported by President Putin of Russia. The horrific crime has a possibility of changing an important regional conflict into a first-order global shock. The foreign policy makers of the world should work-out ways and means to deal with the arrogant Russian leader, Vladimir Putin.

Much ridiculed western sanctions against Russia seem to have had a much bigger impact than the headline number suggested. Now foreign investors see capital risk, where before they saw none. Regulatory permissions were withheld as in the case of Gaze-prom’s recent application to use spare capacity of a German gas pipeline. Uncertainty will affect market valuation and so this will have an impact on Gazprom share prices. Putin’s annexation of Crimea and the global response to it has left Russia on the brink of recession. It is not clear to what extent this annexation contributed to lack-luster economic recovery in the euro-zone. The data released recently shows that the German economy has weakened while the conflict escalated. Could it be a mere co-incidence?

EU member states have different interests. Germany and Italy, for example, have a strong relations and trade links with Russia. Nobody wants to contribute to the further escalation of prices. However, if the Russian involvement of shooting down the aircraft is confirmed beyond doubts, the EU will need to harden its response. It should go for all-out financial sanctions. The euro and pound are important global funding companies for Russian currencies. The city of London is a financial market through which Russia manages a major part of their currency activities. This should be stopped immediately. In addition, the EU should also consider ban on energy imports. Those said is not easily done. Instead, the EU should start looking for other sources of energy supply.

The macro-economic impact of this incident is not clear yet but one thing is certain. If the EU does not show its strength in fighting the Russian arrogance, they may engage into activities that may cause the global economy to collapse. Global shocks teach us an important lesson. For example, in 1998, the Asian currency crisis turned the Chinese balance sheet into a permanent depression.

It is sad that the European policy makers are caught in the mess. But then, if they do not act, it will have missed out an opportunity to teach Vladimir Putin an important lesson, which is “we all live together in this globalized world and any misgivings about that will only result in economic catastrophe and political disarray.

<< back to blog

About Us

TERM ZERO

Media

Rankings

Accreditations

NIRF

Campus

Blog

Annual Events

Full Time Programs

PGPM

PGDM

EXECUTIVE EDUCATION

Corporate Programs

PGXPM

PGPM Flex

MBA in Business Analytics

Family Enterprises Management

Ranked 6 ^th

Faculty

Research

Centers of Excellence

Conferences

Campus Recruitment

Internships

Placement Reports

Leadership Series

Talent Listings

Ranked 6 th

Ranked 6 ^th