The war between Russia and Ukraine had been lasting for over a month. Thousands of soldiers and civilians have been killed since the invasion and over 4 million people have fled Ukraine to fight for their lives, with an additional 7 million people forced to leave their homes.
The conflict has caused irreversible impacts on the world economy. After sanctions towards Russia were imposed by many countries and the European Union, we are seeing major interruptions in global supply chains that is translating into product shortages and price increases.
One of the major impacts from an economical standpoint is energy prices. Russia, as the world’s 3rd largest oil producer, produces over 10.7 million barrels of oil every day and accounts for 12% of the total market share. More than 60% of the EU’s daily energy needs are reliant on Russian resources, and because reliance varies between countries, agreement on an EU boycott on Russia is harder to achieve. In addition, removing the 10 million-plus barrels of oil from a market with high demand every day would inevitably push oil prices higher worldwide. As an example, the BBC has reported that the average price of a litre of petrol recently hit an all-time high of £1.67 Great British Pound in the UK, compared to £1.24 before the invasion.
Another potential risk is food supply. Russia and Ukraine are major suppliers of wheat, barley and corn, while Ukraine is also ranked first in sunflower oil exports which are mostly used in food processing. Ukrainian ports that send wheat and other products worldwide have been shut down as people flee for their lives, while vessels departing from Russian ports have been banned in multiple countries. The food price index in March from the UN Food and Agriculture Organisation rose to its third record high in a row, jumping 34% from a year ago. The index was 12.6% higher than in February, a rise that the organisation described as a “giant leap”.
The effects have been felt in Russia, too, of course, where sanctions are leading to unprecedented economic impacts. Bans on Russian Airlines from EU, Canada and US airspace, asset freezes against Russian celebrities and businesses, and the exclusion of Russian Banks from the Swift payment network have crippled the Russian economy. The Russian Ministry of Economics has announced that the predicted annual inflation rate in 2022 has skyrocketed to 14.5%, a massive 6.1% increase from last year. The Russian Ruble has lost more than 40% of its value, forcing retailers to increase their prices. In the southern city of Samara, a can of tuna now costs 160-180 roubles when it used to cost only 120 roubles.
We will likely continue to see economic instability having its effect caused by the war. “We are facing a moment of very elevated costs, and we don’t know what lies ahead,” Jaume Bernid, a 58-year-old breeder in Northeast Spain told Global News, “This is another cost of waging a war in the 21st century.”
Cover photo: Erik Scheel