Daily Writeup & Opinion | The Impact of the Russo-Ukrainian War on the World Economy
The following article, “The Impact of the Russo-Ukrainian War on the World Economy“, is written by Syed Muhammad Hamza, a student of Sir Syed Kazim Ali. Moreover, the article is written on the same pattern, taught by Sir to his students, scoring the highest marks in compulsory subjects for years. Sir Kazim has uploaded his students’ solved past paper questions so other thousands of aspirants can understand how to crack a topic or question, how to write relevantly, what coherence is, and how to include and connect ideas, opinions, and suggestions to score the maximum.
With the outbreak of Russo – the Russo-Ukrainian war, no territory across the globe remains untouched by the fiery repercussions of the economic inferno. In the era of globalization, where the markets are interconnected, a surge of a war between the world’s biggest energy supplier, Russia, and the bread basket of Europe, Ukraine, imposes a serious threat to the world’s peace and economy. As a matter of fact, the adverse impact of the war is evident from the reports of the World Bank and IMF, which state that world inflation will climb up to 8 per cent by the end of the fiscal year 2023. Besides surging global energy prices, plunging Europe into food shortage, and hampering the import–oriented countries, the list of impacts of Russo – the Ukrainian war seems ruthless. Nevertheless, to curb the drastic impacts of the war, the global powers must take the help of pragmatic and conflict-resolving tactics. Hence, the world must comprehend that peace in the very region of conflict is indispensable for the world’s economy as the war has escalated threats in major trading routes of the world: the Mediterranean Sea, the Red Sea, and the Black Sea. In the subsequent essay, the impacts of the Russo–Ukrainian war, along with solutions, are discussed in detail.
“Geopolitical tensions stemming from the war have triggered economic sanctions and trade restrictions, affecting international trade and investment.”
Dr. Yang Ping (A Prominent Writer of Political Economy)
The plot of the war has not been established overnight. Indeed, Ukraine – especially its eastern region- has been the crucible of geopolitical tensions for the last three decades. With the dismantling of the USSR into Russia and 15 other sovereign states, an agreement was signed between the US and Russia regarding the unification of Germany, for Russia had a stronghold in the areas of West Germany on the condition that no country of Eastern Europe would join NATO. However, the agreement was undermined by the US, leading to the inclusion of Poland, Hungry, and the Czech Republic in NATO. Soon after the arrangements and negotiations between Ukraine and NATO reached their peak regarding its membership in December 2021, Russia launched a war, annexing 04 eastern European regions. The very act of Russia is proclaimed to help the Ukrainian brothers of Eastern Ukraine, for the latter haven’t received authority to self–rule according to the MINSIK II agreement. Hence, the context of the war is as clear as crystal clear that Russia is afraid of Ukraine’s inclusion in NATO, looking at it as the tactic of the US to keep a close eye on it.
The war we are fighting today against the Ukrainian people is a war for the existence of Russia as a nation.”
Vladimir Putin
As the conflict between Russia and Ukraine unfolded, the shockwaves reverberated across the globe, sowing the seed of economic enigma. The following part of the essay dives deep to explore the economic impact imposed by the war on the globe.
First, the outbreak of the Russo–Ukraine war has caused a surge in global energy prices. Russia, being the world’s largest energy supplier, providing 14 per cent of the crude oil and 9 per cent of the natural gas globally, after getting involved in the war with Ukraine, has been sanctioned by the European Union reactionary. Consequently, other oil-producing countries, such as the OECD, have to raise the price of oil to meet the abrupt increase in demand. That ultimately has created havoc for the oil-dependent countries. The immediate effect has been on the price of oil barrels in the international market, which went up to 120 dollars, which has decreased to 80 dollars per barrel by 2023. However, third-world countries still experience the repercussions of the energy price hike.
Moreover, as the major supplier of energy to European countries has been Russia for many years, the imposition of sanctions made European countries shift their dependence to the spot market of LPG and LNG. The spot market has been usually open for third-world countries to fulfil their oil and gas demands; however, with the entry of the European countries, the bidding has escalated twofold, making it difficult for third-world countries to import oil at lower prices. Hence, the war has greatly stricken the developing states across the state.
On the other hand, Europe has also been plunged into a food shortage. Since Ukraine has the bread basket of European states, the war in eastern Ukraine has disturbed Ukraine’s trading patterns. For instance, the WB report testifies that Russia and Ukraine rank among the top seven global producers and exporters of wheat, corn, barley, sunflower seeds, and sunflower oil. Most of these products are shipped to North Africa and the Middle East, as well as Europe and China. Consequently, European states, along with other countries around the globe, have entered into a vicious cycle of food shortage. To meet the domestic demand, the states have been indulged in purchasing wheat and corn from other exporting countries, ultimately giving rise to global food inflation due to an increase in demand. Therefore, the outbreak of the war has resulted in a food shortage in Europe and global food inflation.
Furthermore, amidst the uncertainty in the Black Sea, several countries lying near the black sea have been facing disrupted trading patterns. Like, Nicaragua imports 86 per cent of the food articles it consumes from the Black Sea. Similarly, in the case of Sub–Saharan Africa and the Republic of Congo, up to 80 per cent of exports are via the Black Sea. Therefore, gloomy and uncertain clouds over the black sea region have disturbed the food chain and trading patterns of most of the countries of the world. On the other hand, the shipping corporations have also increased their service charges by many folds amid the political turbulence in the coastal regions of the black sea. Hence, the trading contours of the world have been significantly distorted.
Additionally, the outcomes of the war have been more lethal for the import–oriented countries. Since most of the South Asian and Sub–Saharan region countries are import-oriented economies, the economic consequences of the war have led to the slowdown of the economic wheel. Like in the case of Pakistan, escalation in the cost of living has been experienced, especially throughout the last decade. It even paved the way for default for the country as the oil factor and disruption in the import of fertilizers because of war played a crucial role. Thus, there is no doubt that third-world countries have drastically been impacted by the Russo–Ukrainian war.
After learning about the detrimental impacts of the Russo-Ukrainian War, it is indispensable for the world to explore the possible peaceful solution to the war. The remaining portion of the essay expresses two possible solutions amid the unprecedented geopolitical landscape of the globe.
The best solution that lies with a global organization such as the UN is to uphold a pragmatic approach. This includes listening to both states, especially their concerns regarding the eastern Ukrainian countries. Moreover, the completion of the agreement, like MINSINK – II, is mandatory to resolve the issue. Moreover, looking over the tense geopolitical environment, the states must also go for new agreements if they help resolve the issue.
Besides the pragmatic approach, the world must resolve this issue by sticking up to the conflict resolution principles. The principles of conflict resolution include a review of the agreements with the passage of time and drafting win-win solutions for both states. Unless international laws are reviewed according to the changing dynamics of today, peace across the globe seems to be a mere dream solely.
Critically, Russo – the Ukrainian war has raised several questions regarding the spectre annexation trends in the 21st century that are emerging one after the other. It brings the debate to a new zone of discussion about how effective international law remains in the contemporary world. TheThe UN and other international organizations must adhere to provisions that promise a peaceful status quo around the globe. Otherwise, more wars are on the brink of emerging.
To conclude, the Russo – Ukrainian war has unleashed myriad impacts across the globe; however, the economic fluctuations remain a matter of great concern for the globe. From disrupting global trade patterns to food shortage, from global inflation to increase in shipping corporation charges, every country has come within the shadow of the war’s menace. Thus, the world must take the prolonged war between the two key role-playing countries seriously, as it has been the most disturbing event after WWII in European history.
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