Anyone who has been paying attention to the situation in Ukraine is likely well-aware of the unrest happening in the country at the moment. The tension created between protesters and the Ukrainian government has caused President Yanukovych to flee the capital city, thus leaving the area open to those looking to overtake the government. While Americans watch from afar, many fail to take into consideration the fact that the situation in Ukraine could indeed have far-reaching effects that extend beyond the country and into the rest of the world, including the United States.
In order to get a handle on how the political upset in Ukraine could affect the U.S., it’s important to gain an understanding of what’s going on and how things started.
A Brief Rundown on Ukraine
The situation in Ukraine may be a surprise to some, but it has been building up for quite some time. When the government decided to reject a European trade deal last year in favor of receiving a $15 billion bailout from Russia, protesters quickly took action to make clear their displeasure. Tensions have risen since, however, to the point where Ukraine’s parliament has decided to oust President Yanukovych and hold new elections in May. The President vows to remain in power, however, adding more tension to the already thick atmosphere in the country. There’s a lot at stake in this situation not only for Russia, but the entire EU, and potentially America as well.
Potential Effects on the U.S.
At the moment, the outcome in Ukraine is quite uncertain, which serves to further increase the chances that the situation could have far-reaching consequences outside of the country. One major thing to pay attention to is the fact that both the Japanese yen and the U.S. dollar rose in value as soon as word spread about the Russian blockade in Ukraine, which came as a result of Russia’s influence on Europe’s energy supplies. The increases in value seen by the yen and the dollar may have been relatively modest, but there’s no getting around the fact that they occurred and could potentially be viewed as a signpost for things to come. The price of gold also rose to its highest point in four months around the same time, further proving that Ukraine is having a worldwide effect on currencies.
While rising currency values may seem like a positive improvement for the U.S., this isn’t to say that the conflict won’t come along with negative effects as well. If a resolution isn’t seen in a relatively short period of time, there’s a chance that oil and natural gas prices could skyrocket. This is because Russia is one of the largest producers of oil and natural gas in the world, and much of their pipeline is located in Ukraine. In America, the price of both oil and natural gas are already high enough as it is, which calls for even more cause for concern regarding the issues in Ukraine. Just the other day, oil prices in the U.S. rose to $104.92 a barrel, which is the highest price seen in five months time. While it’s too early to tell what might occur in the near future, it’s fair to say that things could potentially get even worse.
There’s another import that might get overlooked, even though it serves a very big role in America. Ukraine is one of the world’s largest exporters of grains, including wheat, barley and corn. Because of the situation, it’s likely that America’s wheat futures could improve as the situation continues to unfold. On Monday, prices for May delivery rose to $6.315 per bushel, serving as the largest increase since September of 2012.
The Bottom Line
At the moment, it’s too early to say whether or not the situation in Ukraine will come to a halt or continue to evolve. One thing’s for certain, though — it’s going to have an effect, large or small, on economies outside of the country.