Money Rehab with Nicole Lapin - 364 Days of War in Ukraine

Episode Date: February 23, 2023

On February 24th of last year, Russia invaded Ukraine. So a year later, where are we? No one has won the war, that much is certain. But is someone winning? You don’t need Money Rehab to know that money is often the most significant weapon in any conflict. So, who is winning on the economic battlefield? Nicole follows the numbers.

Money rehabbers, you get it. When you're trying to have it all, you end up doing a lot of juggling. You have to balance your work, your friends, and everything in between. So when it comes to your finances, the last thing you need is more juggling. That's where Bank of America steps in. With Bank of America, you can manage your banking, borrowing, and even investing all in one place. Their digital tools bring everything together under one roof, giving you a clear view of your finances whenever you need it. Plus, with Bank of America's wealth of expert guidance available at any time, you can feel confident that your

money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's B-O-F-A dot com slash N-E-W pros, P-R-O-S, media. B-O-F-A dot com slash newprosmedia. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. It's time for some money rehab. Tomorrow marks the one-year anniversary of Russia's invasion of Ukraine. It is devastating and not the type of milestone I want to be covering.

Over the past year, millions of people have been displaced and thousands have died. And the whole world is wondering how global superpowers may escalate the conflict even beyond Ukraine. Ukraine, the David in this David and Goliath story, has surprised the watchful world as they have kept the fight alive against all odds. And I do mean against all odds. Russia is the biggest country in the world and geographically is 28 times the size of Ukraine. Russia's population is also larger than Ukraine's by about 100 million people. Despite being a smaller force, Ukraine has shown formidable might with the inspiring leader, President Zelensky, at the helm. So a year later, where are we? No one has won the war, that much is certain.

But is someone winning? You don't need money rehab to know that money is often the most significant weapon in any conflict. So who is winning on the economic battlefield? The short answer is no one really wins in war. But here's how we can start thinking about the longer answer. Since last February, the United States Congress has appropriated more than $112 billion in military and economic support for Ukraine. According to NPR, more than half of that aid is for military assistance, but some has been directed toward keeping Ukraine's government running, which includes funding things like salaries for civil servants, teachers, and healthcare workers. Beyond that, some of the

U.S. aid goes to bigger picture efforts like moving U.S. embassy personnel and funding the investigation of war crimes and Russian oligarchs. As time has gone on and U.S. spending on Ukraine gets bigger, more and more Americans are feeling like the U.S. has spent too much money on Ukraine. are feeling like the U.S. has spent too much money on Ukraine. There is space for that argument, sure. But American officials consider this money not charity, but rather an investment. An investment not just in a worthy political cause, but an investment in stabilizing the economy. Because the U.S. has an economic interest in resolving the war in Ukraine. Some of the high prices we've seen over the last year, specifically with oil and grain, is a direct result of the Russia-Ukraine conflict.

But it's worth noting that although we've been dealing with some financial shrapnel in the United States, it is nothing like what the people of Ukraine and Russia have been facing. According to recent reports, Ukraine lost 35 percent of its GDP in 2022. The war cut off access to the country's ports, disrupted agriculture, and caused Ukrainian workers to leave the country. The Ukrainian prime minister has estimated that the country will likely face a budget deficit of $38 billion this year, much of which will be covered by financing from the International Monetary Fund, a financial agency run by the United Nations. This agreement between Ukraine

and the IMF was finalized during a Russian missile strike in Ukraine. Let's also talk about Russia, because Russia is not waving a flag of victory where money is concerned. The Russian economy has been on shaky ground since the invasion. This has mostly been fueled by sanctions imposed by the U.S. and other supporters of Ukraine, like the EU and Canada. According to CNBC, to date, one of the most significant sanctions was when Russia's largest banks were expelled from the global payment network known as SWIFT. Without SWIFT, it was very difficult for Russian institutions to process overseas transactions. Additionally, major global banks and financial institutions stopped or slowed their business, like Goldman

Sachs, Visa, MasterCard, PayPal, and American Express. Some of these companies cited concerns that they wouldn't be able to process payments and move money in and out of the country due to sanctions. That cast a light of economic uncertainty and instability on Russia. This was furthered by the fact that after the invasion, the ruble, Russia's currency, lost 40% of its value in one month, which sparked theories that the ruble would collapse entirely. Of course, there were other big sanctions, like the U.S. and Britain halting imports of Russian oil and gas. There were also symbolic shifts. For example, for decades, iconic American brands like Levi Jeans and Coca-Cola symbolized the end of the Cold War

and the beginning of freedom for Russians. But over the last year, these very same brands suspended sales of their core products in Russia. None of this paints a pretty picture of Russia's economy. However, the Russian economy shrank only 2.1% in 2022, much less than what experts expected, and much less than the 30% Ukraine's shrink. Despite this fact, experts say this war may wipe out the emerging middle class in Russia, and it's estimated that this war has already caused a 30-year economic setback for Russia. So to go back to the original question, who is winning the war on the financial battlefield? I think with the amount of aid that

has been committed to Ukraine and the amount of global sanctions against Russia, there's a strong argument to be made that they are winning the economic war. Plus, if Ukraine does win the war, whatever that means in this conflict, it's possible Russia will have to pay some sort of reparations. this conflict, it's possible Russia will have to pay some sort of reparations. However, as you can probably imagine, the story isn't this simple. As I mentioned earlier, Russia's population is much larger than Ukraine's, meaning they have a larger population to rebuild the economy when there is, hopefully, some resolution. Plus, the war has been largely fought in Ukraine, so there's more rebuilding that needs to happen there, which will take longer and be more expensive, with fewer workers left in the country. For today's tip, you can take straight to the bank. If you want to

support the people of Ukraine, check the link in the show notes for some resources. I know Ukraine has been in the headlines more last year than it has been in much of our lifetimes, but don't let the conflict become background noise in the news cycle. If you offered some sort of help last year, whether through a donation or volunteering, take some time this month to think about sharing your support again. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a

one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make. Thank you.