The Russia-Ukrainian war is an ongoing war, primarily involving Russia, pro-Russian forces and Belarus on one side and Ukraine and its international supporters on the other. The Russia Ukraine war will affect the global economy via three main channels – Financial sanctions, Commodity prices and supply-chain disruptions.
Russia-Ukrainian war : REASONS BEHIND
Russia wants West to keep Ukraine and other former Soviet Nations out of NATO (North Atlantic Treaty Organisation), halt weapons deployment near Russian borders and roll back forces from Eastern Europe. However, Ukraine wants to join NATO. Russia thinks if Ukraine is allowed to join NATO, the group would not only move closer to Russian border but would become eligible to get support from the group’s members in case of external attacks. Moreover, Russia believes Ukraine could attempt to take back Crima, if it joins NATO.
After the collapse of the Soviet Union, Russia lost control of the 14 former Republics, including Ukraine. Russia demands the West to stay out of Ukraine as Putin wants to restore Moscow’s influence throughout the post-Soviet space. The Russian President Putin hence demands guarantees from the West and Ukraine that it will not join, and that Ukraine demilitarise and become a neutral state.
Russia-Ukrainian WAR IMPACT ON GLOBAL ECONOMY
The repercussions of Russia Ukraine crisis are also menacing the global economy, shaking financial markets and making life more perilous for everyone across the globe.
• ENERGY – Many European countries are heavily dependent on Russian energy, particularly gas through several vital pipelines. Oil prices have already surged, owing to supply disruptions, following sanctions on Russian banks, while traders scrambled to seek alternative oil sources in an already tight market. Russia and Ukraine produce 12% of world’s oil and 17% of its natural gas.
• TRANSPORT – Global transport, which has already been severely disrupted in the aftermath of the Pandemic, is likely to face further problems owing to the war. The transport modes which are likely to be more affected are ocean shipping and real freight. Both play a very important role in the Global business scenario.
• SUPPLY CHAIN – The Russian invasion of Ukraine has rattled global supply chains that are still in disarray from the Pandemic; adding to surging costs, prolonged deliveries and other challenges for companies trying to move goods around the world.
• FOOD SUPPLIES – Ukraine and Russia account for 30% of the world’s exports of wheat, 19% of corn and 80% of Sunflower oil. The threats to farms in Eastern Ukraine and a cut- off of exports through Black Sea Ports could reduce food supplies.
• RISING PRICES – The fighting and sanctions that have disrupted Russian trade with the Global economy, threaten to send prices higher, like never before.
The invasion of Ukraine has come at a delicate time for the world economy, which was just beginning to recover from the ravages of Covid-19. Russia’s war can now have a far-reaching economic consequence for the world population.