Sanctions on Russian exports present challenges

Phil: I'm Phil Orlando, Chief Equity Strategist at Federated Hermes in New York.

Interviewer: How has Russia's military invasion of Ukraine significantly increased geopolitical risks for the economy and financial markets?

Phil: From an economic standpoint, the United States and the NATO countries have imposed severe economic sanctions on Russia's ability to export its cheap products, oil, natural gas, wheat and corn. Looking at the oil market, Russia is one of the three largest energy producers in the world. The United States, Saudi Arabia and Russia. Now Russia produces 10 million barrels a day and exports half of that, 5 million barrels a day. The United States, up until recently, has been importing 700,000 barrels a day of oil from Russia. Germany imports 55% of its natural gas from Russia. The rest of Europe imports 40% of its natural gas from Russia. So these global energy prices have gone vertical over the course of the last month, increasing inflation and pressuring financial markets, so the obvious question is how will the United States and the rest of the world replace the lost Russian energy production? In our mind, the US and the other major swing producers will need to step up their production and fill that global void.

Disclosures: Views are as of March 24, 2022 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Federated Advisory Services Company 22-30099 (3/22)