Sanctions in Russia Increases the Poverty Rate
Since Russia’s invasion of Ukraine in February 2022, many American companies placed sanctions on Russia in support of Ukraine.
Since the fall of the Soviet Union in 1991, American businesses opened up firms in Russia. The economy improved, especially in recent years. In 2018, the poverty rate was 12.6, and the World Bank Staff estimated that the poverty line will decrease to 3.5% in 2021.
But with the sanctions in place, Vladimir Putin’s former chief of economics Andrei Illarionov predicted that the poverty level in Russia will increase. He said to the BBC, “We’ll probably see doubling on the number of those people, maybe even tripling.”
Which Companies Placed Sanctions in Russia
American companies like Coca-Cola and McDonald’srecently placed sanctions in Russia, temporarily stopping business.
In March 2022, Coca-Cola announced it will suspend business in Russia. Russia was responsible for an estimated 2% of Coca-Cola’s income and revenue. Similarly, Coca-Cola’s rival Pepsi, which has a bigger presence in Russia, announced they will stop production.
Chief Executive and Officer Ramon Laguarta told the BBC, “As a food and beverage company, now more than ever, we must stay true to the humanitarian aspect of our business. That means we have a responsibility to continue to offer our other products in Russia, including daily essentials such as milk and other dairy offerings, baby formula and baby food.”
Impact on the Russian Economy
In 2018, Putin targeted to halve the poverty rate in Russia in the next six years. However, since the outbreak of COVID-19, Putin adjusted the goal to halve the poverty rate by 2030.
However, recent events in Ukraine and the sanctions in Russia erased about 15 years of economic growth in Russia. The Institute for International Finance predicted that the Russian economy will plunge about 15% in 2022.
Because of the sanctions in Russia, inflation is expected to increase by 20% or more by the end of 2022. Meanwhile, inflation will increase between 5% and 8% in the West.
Impact on the Russian People
According to the World Bank, about 17 million Russian people live in poverty, as of 2021. Due to the sanctions in Russia, the rate will only increase as more people lose their jobs. Illarionov explained to the BBC that it would be nearly impossible for Russia to have a positive future with the current situation.
Dean and Professor of Economics and School of Business at Cedarville University Dr. Jeffery Haymond told The Borgen Project, “The sanctions in Russia will proportionally hurt Russia more than other countries, especially since Russia is a very unbalanced economy, producing very little outside of its expansive natural resources.”
Because of the sanctions in Russia, the Russian economy will continue to plummet. The Russian people will continue to suffer, but companies like Pepsi continue humanitarian work to help the people out.
