How Russia’s War on Ukraine will Impact the Global Economy
Russia’s invasion of Ukraine is Europe and the Western World’s most serious conflict since World War 2. As of February 2022, the fighting continues as Russian forces lead assaults on major Ukrainian cities, including Kyiv and Kharkiv.
As the fighting rages on, those of us in the United States and across the globe are understandably concerned about the citizens of Ukraine. However, we also have to consider how this conflict will impact us. Not only will we be dealing with civilian deaths, refugee crises, and escalating tensions with Russia, but we will also be dealing with economic ramifications.
A crisis of this magnitude is bound to impact our economy and day-to-day lives. Here, we detail what you can expect in the weeks and months ahead.
Sanctions on Russia
Since Ukraine is not a NATO ally, and the potential of getting directly involved in the conflict could result in a global war, many western nations are hesitant to put troops on the ground. However, it is still important to punish Russia for this invasion and do what we can to support Ukraine. In that effect, many countries (the U.S. included) are imposing sanctions on Russia.
While economic sanctions are necessary, it will restrict and complicate global trade. American businesses will be unable to do business with certain Russian companies and banks. While the pain of these sanctions will mostly hit Russia, it could make certain items harder to attain in the United States.
Worsen the pandemic’s economic effect
While our attention is on Ukraine, it’s important to remember that we are still in the middle of a pandemic. The pandemic has had a huge economic effect, specifically with inflation and financial markets. The invasion of Ukraine will only exacerbate these issues.
Increasing energy costs
Russia and Ukraine are key contributors to the global supply of gas and oil. The United States imports only a small amount of Russian or Ukrainian oil. However, our energy commodity markets are global. This means that if prices change in one part of the world, they’ll change in our part of the world, too. For countries who rely more on Russian and Ukrainian oil, their prices will skyrocket, and ours will follow in-suit.
And we are already seeing the impact. On February 28th, the Brent oil benchmark climbed to $101 a barrel and the American West Texas Intermediate benchmark climbed to $95 a barrel. In terms of what you actually pay at the pump, gas prices have risen a penny a day since the beginning of this crisis.
Wheat production and rising food costs
In addition to gas and oil, Russia and Ukraine are also major global wheat contributors. 30% of global wheat exports and 15% of global corn exports come from Russia and Ukraine. Ukraine also produces a large amount of barley and vegetable oil, both of which are ingredients in many packaged foods. The conflict will restrict how much wheat, corn, barley, and vegetable oil makes it out of these countries. As such, global food prices are expected to rise.
What can we do?
The conflict in Ukraine is bound to impact everyone around the globe. Understanding and preparing for the economic impact can help individuals avoid the worst.
However, conflicts such as these are just a reminder of the challenges modern humans face and will continue to face. Wars, climate change, and more will limit resources and make it difficult for people to meet their basic needs.
But it doesn’t have to be this way. At Renew the Earth, we fight for the creation of an Energy Currency system that will help individuals around the world meet their basic needs by transforming our economic practices.
To learn more about us and what we do, contact us today.