Russia’s ties to the global economy are rapidly unwinding as crushing sanctions and the Kremlin’s response upend decades of post-Soviet reforms.
The Kremlin announced strict banking and export limits meant to prop up its currency’s plunging value this week at the expense of foreigners. Moscow has also pledged to seize the assets of any business leaving Russia and allow its companies to steal Western patents.
Experts say the fallout could last long after the war in Ukraine ends and tarnish Russia’s standing for decades, even if sanctions are eased.
“Measures like this are going to stay in place for a long time. I think this is going to cut Russia off from access to western finance, trade and investment for years, if not decades to come,” said Edward Alden, senior fellow at the Council on Foreign Relations.
“The conclusion will be now that Russia is both an immediate and long-term threat to European and American security, and economic ties with Russia are going to strengthen Russia, and anything that strengthens Russia, is dangerous for the West.”
Kicking Russia out of the WTO and ending normalized trade relations would subject Russian exports to higher tariffs and trade barriers.
Experts say the decision has a limited economic impact, especially as sanctions limit trade between the nations, but sends an important message to the Kremlin.
“It’s not going to be a huge punch, candidly, just because of the nature of the trade flows and the actions we’ve already taken,” said Emily Kilcrease, senior fellow at the Center for a New American Security.
“Nonetheless, you’re doing it with allies, so that will boost the economic impact. And I do think it’s a really important step to show that we’re not going to let Russia freeride on a rules-based system without actually being constrained by it.”
The move to end normal trade relations follows weeks of deepening economic pain in Russia.
The Kremlin and Russian Central Bank have taken extreme steps to prevent the ruble from further devaluation and retaliate against crushing western sanctions. Russia announced it will halt its foreign exports of grain, ban the purchase of dollars and other foreign currencies and limit the amount of foreign currency Russians can withdraw from their bank accounts.
Russia has frozen its battered stock market since the start of the invasion to prevent investors from pulling their funds. Russia has also begun to default on its bond payments, causing its credit rating to plunge amid a mass exodus of foreign businesses.
In response to sanctions and public outcry, more than 300 multinational corporations have suspended some or all of their operations in Russia, including iconic American brands such as Apple, Visa, McDonald’s, Disney and Coca-Cola. Russian citizens are no longer able to use many of their credit cards, watch Netflix shows or even purchase new electronics.
“It’s pretty clear that Russia will become poorer and more technologically backward, the choices for its citizens will be radically diminished, and for many, many years to come,” Alden said.
“That’s an astonishing series of penalties in a very short period of time.”
Putin has vowed to seek “legal solutions” to seize the assets of Western companies that leave the country. The Kremlin aims to take control of businesses with foreign ownership of 25 percent or more, then auction them off to Russian investors.
Moscow is already refusing to return hundreds of airplanes it leased from Western companies, which have a combined value of $10 billion. Russian lawmakers are also weighing taking over auto plants owned by Ford, Stellantis, General Motors, Volkswagen and Toyota, among others, and multi-billion dollar energy projects partially owned by ExxonMobil and BP.
U.S. business leaders and even one of Russia’s wealthiest oligarchs say that the move will effectively bring an end to international investment in Russia, potentially causing permanent damage to the country that would linger even if sanctions were eventually lifted.
“This would take us a hundred years back, to the year 1917, and the consequences of such a step would be the global distrust of Russia from investors, it would be felt for many decades,” Russian billionaire Vladimir Potanin said in a statement Friday on the Telegram messaging app.
Neil Bradley, chief policy officer at the U.S. Chamber of Commerce, the nation’s top corporate lobbying group, said in a statement that such a step “would only add to Russia’s increasing isolation, show its disregard for the rule of law, and ultimately inflict more pain on the Russian people.”
The Kremlin has only worsened investor fears by greenlighting a rule that allows Russian firms to steal intellectual property from companies that are home to “unfriendly” nations such as the U.S. and its allies. Under the Kremlin’s plans, Russian oligarchs could take over assets like Coca-Cola’s bottling factories or Ford’s commercial van manufacturing plant and attempt to continue to manufacture and sell those products under the existing brand.
Steven Fox, founder and CEO of Veracity Worldwide, a consulting firm that advises businesses on geopolitical and regulatory risks, said the controversial moves amount to a “nail in the coffin” for foreign investor appetite in Russia.
“There were always questions with regard to the rule of law in Russia from an investment perspective, and intellectual property theft has long been a concern,” Fox said. “Now, that’s all out in the open, there’s not even a semblance of law.”
Experts do not think that Russia will find success replicating corporations’ activities. Moreover, the Biden administration has pledged to respond with even more sanctions if Russia follows through with its nationalization and patent plans.
“Any lawless decision by Russia to seize the assets of these companies will ultimately result in even more economic pain for Russia,” Psaki tweeted. “It will compound the clear message to the global business community that Russia is not a safe place to invest and do business.”
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
