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This information appeared in a US Chamber newsletter on Friday, February 23, 2022.

鈥淚nternational order is like oxygen鈥攚e don鈥檛 notice it until it鈥檚 not there.鈥� – Dr. Richard Haass

 

Russia鈥檚 unprovoked war

What we are witnessing in聽Eastern Europe is a clear violation of Ukraine鈥檚 sovereignty and territorial integrity. It is a serious breach of international law. As business leaders who value free enterprise and as proponents of democracy, we should all be concerned.

Why it matters:聽For聽those in Ukraine, it is a direct threat to their freedom, their national identity, and their lives. For businesses operating around the world, it is yet another driver of uncertainty and instability.

Big picture:聽The Chamber believes in a world where democratic countries, following the rule of law and the free enterprise system, can be free and prosper. Right now, all face growing threats.

We stand with Ukraine, and we support the U.S. government and our allies taking swift and meaningful action to punish Russia for this invasion and deter future aggression.

What’s next:聽We are helping our members prepare for the economic fallout from this ongoing conflict. We are also providing聽input to the administration and Congress to ensure the measures they take don鈥檛 inadvertently undermine U.S. foreign policy or economic interests.

What the experts are saying

Thursday night, we hosted a call with Dr. Richard Haass and business leaders to share his take on the situation. He is a veteran diplomat, a prominent voice on American foreign policy, and President of the Council on Foreign Relations. Here鈥檚 some of what he had to say:

鈥淭his is a totally unwarranted war of choice.鈥�

• Haass shared his belief that President Putin is 鈥渄etermined to undo a lot of history鈥攈e sees this as essential to his legacy.鈥� He characterized Putin鈥檚 decision-making as 鈥渄ifferent and worrisome鈥� and highlighted the ways Putin has consolidated power in Russia over recent years to free himself from institutional constraints.

鈥淭his is a reminder of how much we all depend on order.”

Why it matters:聽He described Russia鈥檚 aggression as a 鈥渕ajor challenge to the world order鈥欌�欌�攁 system all businesses depend on. Friends and foes around the world are watching closely to see how democratic allies respond.

What we can do:聽Dr. Haass called on the business community to be vocal in this crisis, saying 鈥淚 think the business community is central to our potential to succeed here… I would love to see the business community with a bigger voice.”

The economic consequences of war

Russia may only represent 1% of global GDP鈥攔oughly equivalent to Florida鈥檚 economy鈥攂ut the sanctions necessary to respond to Russia鈥檚 aggression will have a global economic impact. Here鈥檚 what to watch for:

Financial sanctions on Russian banks:

• The administration has announced sanctions on the top 10 Russian financial institutions, covering more than 80% of all banking assets in the country, and impacting affiliates of U.S. and other international businesses.

Why it matters:聽This move effectively cuts off Russian banks from access to the U.S. and European financial systems and limits the ability of Russian firms to do business internationally. It also will affect Western companies that have made investments in Russia.

What’s next:聽In order to effectively implement these sanctions, some businesses have requested a 鈥渨ind-down鈥� period for existing banking relationships. Officials seem聽to understand the importance of such a provision, and the Chamber is working with the Treasury Department to address this concern.

Export controls on tech products:

• The administration has announced export controls to block the sale of select technologies to Russia鈥檚 defense industry, including shipbuilding, maritime, and aerospace firms.

Why it matters:聽These sanctions will restrict the export of select U.S. technologies to Russia. Even products manufactured or assembled elsewhere could be blocked if they contain U.S. components or if they are made using U.S. software or capital goods. This move will severely limit Russia鈥檚 access to critical technologies.

What鈥檚 next:聽The administration is emphasizing publicly and privately that it has tools available to sanction firms that fail to comply with these rules, and other countries are aligned on their implementation.

Big picture:聽Some of these sanctions could impact businesses that don鈥檛 export to Russia or source inputs from the country. Producers of semiconductors, computers, and telecommunications equipment should examine their production chains and distribution networks and consider their compliance obligations.

Global energy wake-up call

Current sanctions do not target the energy and commodities sector as the U.S. and our allies look to balance inflicting harm on Russia鈥檚 economy with addressing global energy needs.

Why it matters:聽Oil quickly rose to about $100 per barrel as markets braced for the economic impact of Russia鈥檚 invasion. With a tight market and limited spare capacity for increased global production in the short-term, any additional disruptions or restrictions will put further upward pressure on prices.

What’s next:聽To blunt potential supply disruptions, immediate steps are being taken to coordinate the release of crude oil from Strategic Petroleum Reserves around the world.

Big picture:聽This experience is a wake-up call that the U.S. must use its leadership in energy production to be energy self-sufficient at home while providing energy security to allies and trading partners. We need a more balanced conversation about how to have smart policies on climate while promoting energy resilience and national security. We must be able to do both.

Heightened cyber concerns

Russian military and intelligence units have long used cyber warfare to advance their national interests. Ukraine has suffered several denial-of-service attacks against government websites, and multiple cybersecurity firms have reported a second, destructive 鈥渨iper attack鈥� against hundreds of computers. It is not clear whether the latter attack will be as widespread as the NotPetya malware attack of 2017, but we are following the situation closely.

So far, we have not seen reports of massive full-scale cyberattacks to debilitate Ukraine鈥檚 command and control structures or communications networks, but these types of attacks are a distinct possibility as the situation develops.聽The U.S. may also see spillover effects in the near and medium-term from Russian cyberattacks.

What we鈥檙e watching:聽The U.S. government is not yet reporting any specific, credible, or direct cyber threats, but this could change rapidly.聽One聽U.S. Chamber member with extensive experience in securing industrial control networks advised that Russia has been actively probing networks in several critical infrastructure sectors in the U.S. since October.

What’s next:聽Cyber officials from the FBI, the Cybersecurity and Infrastructure Security Agency (CISA), and the NSA are advising government and private-sector entities to strengthen their cyber posture amid heightened risks. All businesses聽should expect that as U.S. and allied sanctions kick in, adverse cyber activity could ratchet-up as well.

Go deeper:聽CISA has initiated a聽鈥淪hields Up鈥� campaign with specific guidance and actions that businesses can take to shore up their defenses in advance of any potential malicious cyber activity. Learn more聽.

All eyes on Washington

On Tuesday, March 1, President Biden will address the nation鈥攁nd the world鈥攊n his State of the Union address.

What we鈥檙e listening for:聽In addition to the immediate crisis unfolding in Ukraine, we will look for him to address the challenges facing businesses here at home, including inflationary pressures, workforce shortages, supply chain bottlenecks, anti-competitive policies, rising fuel costs, and more.

Why it matters:聽As global economic risks rise, our domestic policy decisions must not further stoke uncertainty or threaten the fragile recovery. The Chamber is committed to working with the administration and lawmakers of both political parties to ensure our nation can withstand these turbulent times and emerge stronger on the other side.