AYESHA RASCOE, HOST:
We're going to take a look at the economic aspects of what is now war in Ukraine. The human cost of Russia's attack is obvious. Bombardments continue, and Ukrainians seek shelter. But another side to this war will play out in economic sanctions, the weapon the U.S. and its allies plan to use against Russian President Vladimir Putin. President Biden announced more sanctions today, and he acknowledged they'll be felt in the U.S., too.
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PRESIDENT JOE BIDEN: I know this is hard and that Americans are already hurting. I will do everything in my power to limit the pain the American people are feeling at the gas pump. This is critical to me. But this aggression cannot go unanswered. If it did, the consequences for America would be much worse.
RASCOE: For more on this, we're joined by NPR correspondents Scott Horsley and Jackie Northam. Hello to you both.
JACKIE NORTHAM, BYLINE: Hello.
SCOTT HORSLEY, BYLINE: Good afternoon.
RASCOE: Jackie, what are these new sanctions the U.S. and its allies are taking against Russia now that the attack is fully on?
NORTHAM: Well, the sanctions announced today are meant to be more punishing than the ones that were announced earlier this week, and they're really meant to choke Russia's economy. President Biden said the U.S. would sanction four more Russian banks, and that's including two of the biggest - VRB and Sberbank. And, you know, Ayesha, every day, these two banks conduct about $46 billion worth of foreign exchange transactions around the world. That's more than three-quarters of those are done in U.S. dollars. And what today's sanctions do is cut them off - those banks off from processing any payments through the U.S. financial system. So that's a huge blow.
Biden also said the U.S. is sanctioning some of Russia's largest state-owned enterprises and will put new controls on what can be exported to Russia, including strategic U.S.-made products like semiconductors. And finally, there will be more sanctions slapped on some of Russia's elite and their families. You add all of this on top of the sanctions imposed earlier this week, and it can severely hamper Russia's economy, but it will not happen overnight. Sanctions just don't work that way.
RASCOE: And following up on that, Jackie, President Biden has said that it will take time for these economic measures to be felt in Russia. But what makes the administration think that these actions might persuade Putin to change direction?
NORTHAM: Well, the administration is hoping Russians will pressure Putin to halt the invasion of Ukraine. The business community in Russia understands what'll happen with these sanctions, and already today, the Russian Stock Exchange lost a third of its value. The ruble tumbled to an all-time low. There are reports that some Russian executives met with Putin, asking him to take care to avoid further damage to the economy. And also, if Russia can't get some of the sophisticated technology like these semiconductors, it won't be able to grow its military or build new ships, etc.
So President Biden indicated today that the idea is Putin will come under enormous political pressure if Russia's economy tanks because of these sanctions. Let's have a listen to him.
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BIDEN: Putin's aggression against Ukraine will end up costing Russia dearly, economically and strategically. We will make sure of that.
NORTHAM: But Biden acknowledged that people are going to have to be patient for this to play out.
RASCOE: Scott, this conflict is already sending ripple effects throughout the global economy. How are Americans going to feel it in their pocketbooks?
HORSLEY: Well, it's likely to produce higher prices at the gas station, possibly the grocery store as well. Russia is a big oil exporter, and the concern that exports could be disrupted pushed the global price of oil above $100 a barrel today. It settled just below that level. Biden says he is prepared to release more oil from the Strategic Petroleum Reserve, and other countries may do the same.
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BIDEN: My administration is using the tools - every tool at its disposal to protect American families and businesses from rising prices at the gas pump. You know, we're taking active steps to bring down the cost, and American oil and gas companies should not exploit this moment to hike their prices to raise profits.
HORSLEY: Even so, prices at the pump are likely to climb. Russia and Ukraine are also big wheat producers. So while that's not as high-profile as oil, we could see pricier pasta or bread at the supermarket. And, of course, Americans are already facing the highest inflation in almost four decades because of the pandemic. So this invasion just adds to that pain in the pocketbook.
RASCOE: And how is Wall Street reacting to all of this turmoil?
HORSLEY: Well, it was another whiplash-inducing ride today. Investors dumped stocks early, but we saw a big turnaround this afternoon. The Dow was down more than 800 points this morning, but it actually ended the day up about 92 points. The S&P 500 index gained about 1.5% today, and the tech-heavy Nasdaq gained about 3.3%.
Now, investors had been bracing for this invasion for days, so some of the fallout was already baked in. All the major indexes are still down from their previous highs. Both the Dow and the S&P are down around 10%. The Nasdaq's down around 16%. And we are likely to see more of this volatility in the days and weeks to come.
RASCOE: Scott, what about the broader economic fallout? The U.S. economy has been through a lot already. Should Americans worry about a recession?
HORSLEY: You know, Russia's invasion of Ukraine is likely to slow the economic recovery here in the U.S., but it probably won't stop it. The Commerce Department said this morning that the economy actually grew faster at the end of last year than was initially reported. The economy weathered the omicron surge relatively well. And so while events in Ukraine do add more uncertainty to the recovery, it's not likely to really derail it.
This is another curveball, though, for the Federal Reserve to consider, especially if we see both higher inflation and slower economic growth. That could make the Fed more cautious in how it goes about fighting inflation. But the central bank is still widely expected to start raising interest rates next month.
RASCOE: Jackie, in about the minute we have left, is there any sense that there are more sanctions to come as Russia advances through Ukraine?
NORTHAM: Oh, sure. There are more potential financial penalties that the U.S. and the allies could use. They could cut Russia off of something called SWIFT, and this is a highly secure messaging system that's used for financial transactions around the world. President Biden said the Europeans did not want that to happen. Europe has a lot of business with Russia. And if it's kicked off SWIFT, they wouldn't be able to do - you know, get payments or do transactions with these European companies. Also, kicking Russia off SWIFT would affect regular Russians who may not be able to use their credit cards and the like.
The U.S. could also sanction Russia's oil and gas industry, but many analysts are doubtful that that'll happen. There'd be repercussions, you know, for the energy markets and the global economy. So I think for now, the U.S. will see how these sanctions that were imposed today and earlier this week - see how those will work out.
RASCOE: Thank you. That's NPR's Jackie Northam and Scott Horsley. Thank you.
HORSLEY: You're welcome.
NORTHAM: Thanks so much.
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