What’s at Stake for Global Economy as Russia Standoff Escalates

A world economy that’s still recovering from Covid-19 faces new risks from an energy-price spike as the standoff between the West and Russia escalates.

The U.S. and its European allies unveiled limited sanctions on Tuesday, in response to Russian President Vladimir Putin’s decision to recognize two breakaway republics in eastern Ukraine, and warned that tougher penalties may follow. Russia, whose troops are massed around Ukraine, says it has no plans for a full-scale invasion.

The crisis has driven oil prices toward $100 a barrel and sent tremors through other commodity markets too, threatening another wave of price pressures on top of already-high pandemic inflation. Russia is a commodities powerhouse and a key supplier of energy to Europe.

Western nations are caught between the desire for harsh sanctions to deter Putin, and concern that they’ll suffer blowback themselves. For now, Europe and the U.S. have shied away from blocking Russia’s energy exports, or freezing it out of dollar-based finance. Even so, U.S. President Joe Biden warned Americans Tuesday that there’ll be a price to pay at gasoline pumps back home.