Economic WWIII

So, let me focus on Ukraine.  The question by now is not whether there will be a war or even when.  The war has already started, with border clashes, ceasefire violations in the Donbass and the like.  I suppose there might be room to argue about the scale of the war, but I think the Russian buildup on Ukraine's borders answers that one.  The only remaining question is how long the Russians mean to stay, and in how much territory.  I don't think we can have any idea about that.

As I have said before, the good news is that the Russian invasion will not lead to WWIII.  We have ruled out military intervention.  But it will lead to economic WWIII. We may be in a position to hurt Russia, but Russia is in a position to hurt us as well. We all know that gas prices will skyrocket.  Europe receives as much as 40% of its oil from Russia.  There has never been an oil shock on that scale. Furthermore, increase oil prices have a ripple effect into all areas of the economy.  So much for inflation calming down any time soon.

Nor is it just oil.  Read this thread. It is terrifying.  

Our computer chip industry, already stretched past its limit, imports 90% of its Neon from Ukraine and 35% of its palladium from Russia.  Hypothetically, this could halt chip production altogether.  Chip manufacturers say they will get by.  I lack the knowledge to say whether this means they have alternatives, or whether it is just industry happy talk.  The article does have one reassuring comment.  Neon prices increased by 600% during the last Ukraine crisis.  The chip industry carried on.

Russia also has 25% of the world's titanium.  Military planes (for obvious reasons) do not use Russian titanium, but that just steers more commercial aircraft toward it.

Russia produces 2/3 of the world's ammonium nitrate fertilizer and stopped exporting on February 2.  This can only drive rising food prices even higher.

There will almost certainly be cyber attacks as well.  Remember that ransomware attack on Colonial Pipeline?  Not to mention support for Iran in unpredictable ways.  The author concludes:

We could potentially find workarounds against most of these economic responses from Russia but, at a minimum, we should expect further spikes in inflation and pressures on supply chains across numerous critical industries

END

Let us also recall that that sanctions have generally been notable ineffective at toppling hostile governments or even getting them to change their ways.

Still, I suppose there is one bright spot if you want to call it that.  It avoids what I call the rolled-up newspaper problem (or maybe the "if you don't drop dead we'll kill you" problem) that Daniel Drezner writes extensively about.  Namely, how to you remove sanctions?  After all, if you impose sanctions to pressure a hostile country into changing its behavior, you have to be able to remove the sanctions if the behavior changes -- even if the country remains generally hostile otherwise.  

In a country with that much power to retaliate, I do not imagine that will be a problem.