- I'm announcing the first tranche of sanctions.
- These sanctions are a major step.
- And we hold further sanctions at readiness
to be deployed.
- This is about as close to global economic war
as we've ever come.
- Compared to all historical campaigns,
this is staking sanctions to the limit.
- The economy is tanking,
the ruble has fallen through the floor.
Inflation is soaring.
Interest rates are up.
- [Narrator] The Russian invasion of Ukraine triggered
a global economic response
without precedent in terms
of its speed, scale and scope.
- The sanctions we imposed have generated 2/3
of the world joining us.
They are profound sanctions.
- The European Union and its partners
are working to cripple Putin's ability
to finance his war machine.
- [Narrator] In a matter of days,
the US, the UK, the EU and others
essentially unplugged the world's 11th largest economy
from the global economic system.
- We have never applied such deep, severe
and far-reaching sanctions on such a large country.
Vladimir Putin himself has called it a declaration of war
and in economic terms, he's not far off.
- [Narrator] But will this financial assault
on the Russian economy actually achieve its goal
of pressuring Russian President Vladimir Putin
to call off his troops?
- The big gamble right now
is to see if the West can bankrupt Russia enough
that they cannot fight an insurgency.
- [Narrator] Moreover, what will be the consequences
of this economic war for everyday Russians?
And how will this conflict affect the US economy
and the lives of everyday Americans?
In 1990, just months after the fall of the Berlin Wall,
Russia's first McDonald's opened in Moscow,
a sign that the nation was joining the global economy.
But on March 8th of this year,
the chain announced that it would be closing all
of its restaurants in Russia temporarily.
- It definitely feels like a new Iron Curtain
is coming down between East and West.
I mean, back during the Cold War,
it was taken for granted that the Soviet bloc
and the Western bloc did not trade with each other
and we're in some sense returning to that world.
- [Narrator] The first move was made by Western governments
when they targeted Russia's banking system
by blocking the Russian Central Bank
from selling its foreign currency reserves.
- We will stop Putin from using his war chest.
- Perhaps the most severe impact
has been the seizing of the assets
of the Central Bank of Russia.
Basically, Putin put away a lot of money
for a rainy day to help him weather the storms
of future sanctions episodes.
(Vladimir speaking in foreign language)
- [Narrator] Sanctions sent the value
of the ruble to an all-time low against the dollar.
Prices for Russia's most important exports,
like natural gas, nickel and wheat shot up to record highs.
The US, the EU, the UK and Canada removed some Russian banks
from SWFIT, the financial messaging network used
by banks across the globe.
Additional sanctions included blacklisting
Russia's biggest banks from the global financial system,
legislation to freeze Russian oligarch wealth abroad.
- This is not an economic crime bill,
it's an economic warfare bill.
- [Narrator] And export restrictions
for certain technologies.
- We estimate that we'll cut off more than half
of Russia's high-tech imports.
- [Narrator] This economic war may have begun
with government sanctions
but as the conflict has continued,
private companies and investors
have begun to voluntarily sever ties with Russian.
- Many Western companies, without being forced to,
are simply packing up and leaving Russia.
We're seeing, even though in theory Russian oil and gas
is exempt from sanctions,
many market participants simply don't want
to do business with Russian oil and gas.
- [Narrator] Some Western companies decided
to suspend operations in Russia,
while others decided to pull out entirely.
(Vladimir speaking in foreign language)
- [Narrator] For everyday Russians,
the sanctions can be seen in emptier shops
as foreign brands and businesses pause their operations
or exit the country entirely.
There's also bank runs
as those with deposits in foreign currency rush
to take it out or convert their rubles to dollars
to protect the value of their savings.
- Imagine that you had a bank account full
of money and you said, well,
there's all the money I need to buy my groceries,
put gas in my car, to pay my mortgage bill.
And then one day the government said,
"I'm sorry, you have all that money
but we're not gonna let you have access it."
What's gonna happen?
Well, you're gonna starve, your car's gonna run out of gas
and you're gonna default on your mortgage
and that is more or less what's happening to Russia
on kind of a macro scale.
- [Narrator] Russian bond prices also sank.
The country's dollar-denominated sovereign bonds
were quoted at around 17 cents on the dollar on March 2nd,
down from 95 cents the previous week.
- It is more or less being shoved
into the financial equivalent of the Stone Age.
- You'll see over the coming weeks that a global economy,
a Western-oriented economy,
a relatively well-off middle class economy
is gonna see its livelihood be wiped out.
- [Narrator] Although Russia will bear the brunt
of these sanctions,
their impact is already being felt across the world.
- You don't cut yourself off from one
of the world's largest exporters
of oil and gas and other valuable commodities overnight
and expect there to be no effect.
- [Narrator] This month, the price for brent crude oil
hit a record high.
- Today I'm announcing the United States
is targeting the main artery of Russia's economy.
- [Narrator] The Biden administration banned the import
of Russian oil, though the US only imports about 8%
of its oil from Russia.
(Vladimir speaking in foreign language)
- [Narrator] Russia produces 11% of global oil
and possesses 25% of the world's natural gas reserves,
so cutting those resources off
from the global economy is unlikely to happen overnight.
That's especially true
for Russia's biggest natural gas customer, Europe,
which relies on Russia for about 40%
of its natural gas.
- And that's the big question mark.
Who's gonna touch gas first?
It's a third rail.
Will Europe do it
and say we're gonna take the economic costs no matter what?
- Putin could preempt that
and stop shipments of oil and gas to Europe.
That would have a dramatic impact
on European economies
but it would also mean that no money is flow
or hardly any money is flowing into Russia anymore.
- [Narrator] Russia's also the world's largest exporter
of wheat, a major exporter of coal
and one of the top producers of metals and fertilizer.
- How are we gonna replace that grain, right?
How are we gonna make sure
that North Africa and the Middle East don't starve
as a result of this?
- [Narrator] Sanctions are supposed
to compel a country to change its behavior
but some experts say these economic tools
don't always accomplish their goals.
- I think it could backfire.
Yeah.
- [Narrator] Julia Friedlander says historically
they've rarely forced
the targeted country to change its behavior.
- If your goal is to stop a war,
to stop Putin from flattening Ukraine
using financial means, then you may lose.
Putin tomorrow could flatten Ukraine
through aerial bombardment
and then sanctions would have meant nothing.
We might come to see that these sanctions
were not worth it.
That all of the effort that we expended
actually caused more crisis than we had reckoned with.
(dramatic music)
- [Narrator] In some cases,
sanctions have hastened global conflict
rather than ending it.
- If you go back in history,
you can find the sanctions
or oil embargo against Japan pushed the Japanese regime
into a corner and led them to respond militarily.
And we got Pearl Harbor.
- [Narrator] On March 16th,
Fed Chairman Jerome Powell announced
that the central bank would be hiking interest rates
to curb rising inflation,
which is being exacerbated by the war.
- The surge in prices of crude oil
and other commodities that resulted
from Russia's invasion of Ukraine
will put additional upward pressure
on near-term inflation here at home.
- The American government can take steps
to help manage and assuage some
of the pain that is being felt
by those that are affected most directly
by the increased energy costs.
- Right now there is extraordinary support
across the West for these sanctions
and for the Ukrainian people.
It is not clear that six months from now
after a period of very painfully high prices
and perhaps weaker economic growth
if that support will still be there.