While boycotts ban Russian products and gas, economists weigh the costs
Americans are avoiding Russian-made products and companies as a way to support Ukrainians against Russia’s invasion.
Utah, Ohio and New Hampshire are boycotting Russian vodka and liquor. Texas wants supermarkets to voluntarily pull Russian products from shelves. New York and Connecticut are also divesting from Russian companies.
WSHU’s Mike Lyle spoke with Hofstra University economist Robert Guttmann to find out how local boycotts of Russian-made products impact the war effort.
WSHU: What could be the impact of boycotting Russian products on President Putin’s decisions to stay in Ukraine? Do local economics impact global supply and demand?
RG: Russia is a major gas and oil supplier and any disruptions from its supplies especially to the European Union is going to have a big impact.
WSHU: Well, gas prices and grocery prices are up because of U.S. and Western sanctions on Russia. So, how will boycotts pinch American consumers?
RG: The crux of the matter is whether we can cut down on supplies of oil and gas because that is their lifeline to the global economy. That’s what they are going to need to also survive a siege economy to be imposing on them. So if you want to make the siege tighter, we have to shut off the major supplies that give them the money that they need to survive….
That is going to create a major dislocation in the global energy market. And that is going to raise gas prices in the U.S. and raise heating prices in the still cold Europe.
WSHU: How will sanctions and boycotts affect trade between the U.S. and Russia in the long term?
RG: The trade between U.S. and Russia was never really large but it is going to be more or less shut down…. Russia is going to be completely more or less shut down with exceptions to China and a couple of other states. We’re shutting down Russia in a spectacular way.
WSHU: What is the economic damage Ukraine is going to have from this invasion and how can us Americans help in the recovery efforts?
RG: Depends what happens to Ukraine…. Russia is going to destroy the place already is doing that in a scale that is close to genocide.
WSHU: Do you think instituting a no fly zone is appropriate to keep everybody safe from Russia or do you think that's going to escalate tensions a little more and that's going to result in Russia going deep in what's going on?
RG: No, if you have a no fly zone, you’re at war with Russia. So we need to decide whether we want that or not.
WSHU: Understandable. And finally do you see things getting back to normal at some point when this is all over with? Do you think Americans and the American economy in particular will see the gas prices come down and the inflation drop a little bit or do you think this is going to be with us for the foreseeable future even into maybe the next calendar year?
RG: We are in kind of an unprecedented situation and there are lots of different scenarios. One thing that is pretty clear is there is a major supply shortage in the energy markets globally….
So we're talking about six to nine months where the gas prices are raised heavily to like $5.50 to $6.00 a gallon.
WSHU: Do you have any sense of how long Russia could hold out given the global financial restraints that are on it right now?
RG: That depends on whether they still have a chance to sell oil and gas including to states that are not part of the global boycott, which would be China. Secondarily, how fast the European Union wants to shut down the gas supplies as they come out of the winter.
But if the Russian government plans to sell 50% or even 40% of what it did in peacetime, it's going to have enough money to basically survive a siege economy provided it can get its people back into a completely different mode of living and that's a huge question. It's not going to be easy for the government to impose that as much as its imposing silence.