The Ukraine crisis has both magnified threats and complicated the potential solutions of several economic factors. Here’s a look at how the global economy can be impacted.
As the Russia-Ukraine conflict entered its seventh day on Wednesday, the east continued its attacks on crowded Ukrainian cities with long convoys of Russian tanks and other vehicles, sparking a brutal financial backlash in the process. Visible around the world and not only the position of Russian President Vladimir Putin.
As Russia bears the brunt of sanctions imposed by Western countries, in which many Russian banks have been cut off from the interbank payment system SWIFT, the ongoing conflict could affect industries that are concerned with raw materials, especially raw materials, according to multiple news reports. are largely dependent on the supply of industrial goods. ,
Moreover, the repercussions are threatening the global economy, shaking up financial markets and making life more dangerous for everyone.
Here’s a look at how the ongoing Putin war on Ukraine could affect the global economy:
Many European countries are heavily dependent on Russian energy, especially gas through several important pipelines. Even if the conflict does end, there is a possibility that harsh economic sanctions on Russia will make it very difficult for these countries to be able to import gas.
Meanwhile, oil prices rose on Wednesday as sanctions on Russian banks disrupted supplies while traders scrambled to seek alternative oil sources in an already tight market.
Brent crude futures were up more than $8 to touch a peak of $113.02 a barrel, the highest since June 2014, prior to $111.53, from $6.56 to $6.56 by 0950 GMT, or 6.3 per cent by 0950 GMT.
US West Texas Intermediate (WTI) crude futures also jumped more than $8 a barrel, hitting their highest level since August 2013, rising $6.39, or 6.2 per cent, to $109.80 a barrel before losing some steam
With global transport already severely disrupted after the pandemic, the war is likely to create more problems. The modes of transport that are likely to be affected include maritime shipping and rail freight. While rail accounts for only a small part of the total freight traffic between Asia and Europe, it has played an important role during recent transport disruptions and continues to grow. Countries like Lithuania are expecting their rail traffic to be severely affected by sanctions against Russia.
The supply chain:
The world’s unexpectedly strong recovery from the pandemic slowdown has left companies scrambling to find enough raw materials and components to produce goods to meet growing customer demand. Overwhelmed factories, ports and freight yards mean shortages, shipping delays and high prices. Disruptions in Russian and Ukrainian industries could delay any return to normal circumstances.
Ukraine alone accounts for almost half of sunflower oil exports. If harvesting and processing in war-torn Ukraine is disrupted, or exports are blocked, importers will struggle to replace supplies.
In India, with the grave threat of supply disruption, companies are left with not many options but to consider raising the prices of daily-consumed edible oils within the week. According to the country’s leading edible oil manufacturers, more than 70 per cent of India’s crude edible oil demand is met through imports. For sunflower oil, the portion is even higher.
Ukraine and Russia account for 30 per cent of the world’s wheat exports, 19 per cent of corn and 80 per cent of sunflower oil, which is used in food processing. Most of the Russian and Ukrainian bounties go to poor, unstable countries such as Yemen and Libya, the Associated Press reports.
The threat to farms in eastern Ukraine and cutting exports through Black Sea ports could reduce food supplies when prices are at their highest level since 2011 and some countries are suffering from food shortages.
The Ukraine war coincides with a high-risk moment for the Federal Reserve and other central banks. They were alarmed by the surge in inflation over the past year – the result, mostly, of the economy’s unexpectedly strong recovery.
In January, US consumer prices rose 7.5 per cent from a year earlier, the biggest such jump since 1982. In Europe, Wednesday’s figures showed inflation reached a record 5.8 per cent last month, faster than a year ago for the 19 countries that use Euro currency.
“Now, the battle and sanctions that have disrupted Russia’s trade with the global economy threaten to send prices higher, especially for energy,” Mark Zandi, chief economist at Moody’s Analytics, told the AP. Russia and Ukraine, Zandi said, produce 12 per cent of the world’s oil and 17 per cent of natural gas.
The war is expected to cause heavy losses to the automobile sector. Rising oil prices continued shortages of semiconductors and chips and other rare earth metals are likely to add to the industry’s woes. In addition, Ukraine is also home to several companies that manufacture car components for automakers.
Leoni AG, which supplies wire systems made in Ukraine to European auto companies, has closed two of its factories in the country, according to a report in The Wall Street Journal. As a result, Volkswagen AG had to close one of its plants in Germany.
“Ukraine is not central to our supply chain, but suddenly we found out that when this part is missing, it is,”
the publication quoted a Volkswagen spokesperson as saying.
Before Putin’s troops invaded Ukraine, the global economy was strained under several burdens: rising inflation entangled supply chains and plunging stock prices. The Ukraine crisis amplified each threat and complicated possible solutions.