Home News How Russia’s Invasion of Ukraine Will Affect The Global Economy

How Russia’s Invasion of Ukraine Will Affect The Global Economy

On February 25th, Russian armed forces reached Kyiv, the capital of Ukraine. This move was anticipated after Ukrainian President Volodymyr Zelensky requested to join NATO in 2021 — an action that appears to have served as the excuse Russian President Vladimir Putin needed to develop a pretext for invasion. It also isn’t the first time Russia has encroached on Ukrainian territory since the Soviet Union formally dissolved in 1991. Stay tuned to our website News235.com for the latest updates!!!!!

How Russia's Invasion of Ukraine Will Affect The Global Economy

How Russia’s Invasion of Ukraine Will Affect The Global Economy

In 2014, Russian forces annexed Crimea, a peninsula in the Black Sea. Adding to the consequences this time around –– from a global perspective –– is the ongoing COVID-19 pandemic, which has already strained economies around the world. With Ukraine’s allies placing sanctions on Russia, a significant provider of natural resources, the global economy will take a hit. Here’s how.

Agriculture

Both Russia and Ukraine produce wheat comprising a significant portion of the EU’s supply. They also export goods like maize, sunflower oil, barley, and soybeans. This may offer advantages for farmers in countries like Australia, India, and the United States in that they too produce these goods and will now face less competition in the short term. However, The Conversation notes that net importers and countries with rising agricultural demand will cause food prices to increase even more than they have been due to the pandemic. Dry weather conditions and poor harvests in both South America and Asia may further exacerbate the situation, leading analysts to believe the ongoing conflict will ultimately have a negative impact on food stability.

Precious metals

Russia also supplies 40% of the world’s aluminum and palladium, which are used for vehicle catalytic converters as well as hydrogen fuel technology. Thus, on top of the ongoing semiconductor shortage caused by the pandemic-disrupted supply chains, sanctions against the country may worsen automotive production and car prices.

In 2019, the Russian mining industry was also the second-highest producer of gold and the fourth-highest for silver. As a result, we’ve reported on News235 that gold and silver prices are already surging as a result of the Russia-Ukraine conflict. On a brighter note, this may serve as good news for investors who hold these precious commodities.

Oil and gas

Russia’s vast expanse allows it to produce over 10 million barrels of oil a day, amounting to more than 10% of global oil demand. The country provides a major portion of the world’s oil and gas — and the majority of the supply t in Europe. The continent is currently experiencing an energy crisis, and The Guardian reports that fears of interrupting pipeline flow from Russia have the EU scrambling for alternative energy sources. However, Putin’s partnerships with other major oil-producing countries like Saudi Arabia, which were formulated with anti-U.S. sentiments in mind, will make this task difficult. In the meantime, those both within Europe and beyond can expect oil and gas prices to rise.

Inflation

Another consequence of the pandemic has been the rising inflation it has caused in countries around the world. And the additional complication of the Russia-Ukraine conflict now has central banks everywhere scrambling to change policies in response. A feature on how inflation affects interest rates by AskMoney states that inflation and interest rates tend to trend in opposing ways, which is why many of these initial policy changes have involved increasing interest rates to combat inflation. However, rising prices on various commodities across the board ultimately mean that these changes will not suffice.

Despite countries like the U.S. considering moderate increases to interest rates to prevent running inflation, consumers across the globe can expect prices to continue rising as they have been since the pandemic began in 2020. It is clear that Russia’s invasion of Ukraine affects more than just the parties involved. Though producers of and investors in resources may benefit in some ways, everyday consumers will continue to be burdened by price instabilities across the board. At this point, it’s safe to say that the World Bank’s predictions for post-pandemic economic recovery after 2023 may be pushed back even further.

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