Issued on: 03/23/2022 – 04:18Modified: 03/23/2022 – 04:16
Paris (AFP) – In a month of conflict in Ukraine, global oil prices have soared, foreign companies have left Russia and Moscow faces the specter of default.
Here’s a look at the economic fallout from Russia’s February 24 invasion of its neighbor:
commodities rise
Oil and gas prices have soared on supply fears as Russia is one of the world’s largest fossil fuel producers and exporters.
Brent North Sea Crude, the international benchmark, was around $90 in February. It jumped to $139.13 on March 7th, near a 14-year high, and prices remain very volatile.
Prices at the pump have also risen, prompting governments to take action to ease consumers’ financial pains: a lower VAT in Sweden, a price cap in Hungary or a rebate in France.
Gas prices have also skyrocketed, with the European reference Dutch TTF hitting an all-time high of €345 on March 7th.
The United States, Canada and Britain have announced Russian oil bans.
The European Union has avoided sanctions on Russia’s energy sector because countries like Germany are heavily dependent on Moscow’s gas supplies.
Other commodities that are massively produced in Russia have risen sharply, including nickel and aluminum.
Auto industry supply chains are facing disruptions as key parts come from Ukraine.
food threat
UN chief Antonio Guterres has warned that the conflict could resonate well beyond Ukraine, causing a “hurricane of hunger and a meltdown of the global food system”.
Russia and Ukraine are breadbaskets for the world and together account for 30 percent of world wheat exports.
Grain and cooking oil prices have risen.
According to the Food and Agriculture Organization of the United Nations, the number of undernourished people could rise by eight million to 13 million over the course of this year and next.
The ships are not leaving Ukraine and there are concerns about the upcoming sowing season in the country.
The United States, India and Europe could meet wheat shortages. But replacing sunflower oil and corn, of which Ukraine is the world’s top and fourth-biggest exporter, might be more complicated.
Markets rattled
Equity markets had started 2022 well as economies recovered from the Covid pandemic and companies delivered healthy results.
But the war has brought volatility to markets, while the Moscow Stock Exchange was closed for three weeks and only partially reopened on Monday.
Western sanctions have paralyzed Russia’s banking sector and financial system while the ruble has collapsed.
The measures include efforts to freeze $300 billion in Russian foreign exchange reserves held abroad.
Russia now faces the risk of default for the first time in decades.
Moscow paid interest on two dollar-denominated bonds last week, giving the government some breathing room until the next debt payments in the coming weeks.
companies flee
Hundreds of Western companies have closed shops and offices in Russia since the war began – because of sanctions, political pressure or public opinion.
The list includes famous names like Ikea, Coca-Cola and MacDonald’s.
Russian President Vladimir Putin has threatened to nationalize foreign companies.
Some companies have chosen to stay in Russia, citing their social responsibility of not abandoning their local employees and depriving the population of essential goods.
slower growth
The war threatens to weigh on the global economic recovery from the Covid pandemic.
The OECD has warned that the conflict could hurt global growth by a percentage point.
The IMF is expected to downgrade its growth forecast, which currently stands at 4.4 percent for 2022.
“The entire global economy will feel the effects of the crisis through slower growth, trade disruptions and higher inflation, which will particularly hurt the poorest and most vulnerable,” warned the IMF, the World Bank and the European Bank for Reconstruction and Development (EBRD) in a joint pronouncement.
With inflation rising, analysts fear economies could face a period of stagflation – a toxic mix of soaring prices and sluggish growth.
“Even if the war ended today, the consequences of this conflict would be felt for months and that would affect commodity prices,” EBRD Chief Economist Beata Javorcik told AFP.
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© 2022 AFP
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