When tragedy strikes, we care about how it happened and why it happened. Economic consequences should be secondary.
The shooting down of Malaysia Airlines MH17 is a catastrophe of a different category. This horrific crime has the potential of turning an important regional conflict into a first-order global shock. Policy makers should prepare for this.
The much-ridiculed western sanctions against Russia have already had a much bigger effect than the headline numbers suggested. Foreign investors suddenly saw risk where before they saw none. Regulatory permissions were withheld – as in the case of Gazprom’s recent application to use spare capacity of a German gas pipeline. Uncertainty affects market valuations. The indirect effects trump the direct ones.