Here’s How Russia’s Invasion of Ukraine Could Impact Michigan’s Economy

DETROIT (WXYZ) — The invasion of Ukraine has people around the world worried. The human toll of the war is heartbreaking. It also has a global economic impact.

7 Action News spoke to Russian historical, business and economic experts about the potential impact here in Metro Detroit.

Related: What Will Economic Sanctions Against Russia Mean For Prisoners Like Paul Whelan?

The United States responded to the Russian invasion of Ukraine with economic sanctions. The aim is to damage Russia’s ability to fund the conflict and harm the economy in ways that create political pressure on President Vladimir Putin.

“We’re in uncharted territory right now,” said University of Michigan finance professor Paolo Pasquariello.

He teaches a course on international finance. He says the impact of Russia sanctions on banks around the world is not yet clear, which will lead to market volatility. To understand the concern, the collapse of global financial services company Lehman Brothers contributed significantly to the 2008 financial crisis. This is a completely different scenario, but financial experts are watching the situation closely. , anticipating unintended consequences.

“Any economist who claims to give you an answer with certainty on this subject is lying to you. We don’t know,” Pasquariello said.

“It really destabilized the Russian economy,” said Aaron B. Retish, professor of Russian history at Wayne State University.

Sanctions in place prevent the Kremlin from accessing its more than $600 billion in reserves in the United States or US dollars in foreign countries. They also cut off some Russian banks from the SWIFT financial messaging system, which is used by thousands of banks around the world.

“So most Russians are going to find themselves cut off from the financial systems,” Pasquariello said.

“You will see the ruble continue to crash and prices in Russia continue to rise,” Retish said.

Here in the United States, what impact can we expect to see?

“The most obvious will probably be filling up your car with gas. The price will probably go up,” Retish said.

Related: Gas prices continue to climb in Michigan amid Russian invasion of Ukraine

Russia is the largest exporter of natural gas in the world. Russia’s invasion of Ukraine has created uncertainty in this market, increasing demand.

The sanctions also have a limited impact on some local businesses that trade with Russia.

“We have so many ties between Detroit, our auto industry and Russian companies,” said Marian Reich, president of Global Ties Detroit, a US State Department organization that sponsors citizens to establish business relationships in other country.

She spoke to Russians she has worked with in the past in recent days.

“They’re all very concerned. Many are talking about what their government is doing. And they’re very concerned about their ability to do business to travel,” Reich said.

“I have clients that range from FIN-TECH companies to healthcare, called medical technology companies, to mobility companies,” said Jonathan Quarles.

Jonathan Quarles is CEO of BTL Group and international business consultant. He made a trip through Global Ties Detroit in Russia planned to make connections for Detroit businesses that are now on hold. He says technology and mobility companies are just a few related industries.

He says his concern is with the people whose lives are at stake and thinking that the more economies and people are connected, the less likely war is. It reminds him of his purpose.

“In the middle of all the politics, it’s about the people. There are innocent people whose lives are taken,” Quarles said.

“We can increase peace, understanding and prosperity through these connections,” Reich said.

And while we may be feeling some economic impacts locally, experts have tried to put things into perspective.

“It obviously affects the economy the most drastically in Ukraine and Russia. It will affect the economy in Europe, especially those that border Russia and are most dependent on Russian products like the Netherlands, and we will least all,” Retich said.

“Commercial ties between the United States and Russia are relatively weak,” Pasquariello said.