Russia and Ukraine represent more than half of the world’s supply of sunflower oil and about 30% of the world’s wheat. Also more noteworthy is Russia, one of the largest global exported. Its Economy contributes greatly to the global Petroleum economy. Sanctions placed on Russia could make inflation even higher.
The biggest threat to the world economy is Inflation. As if Covid 19 did not do enough damage to the global economy. The most recent war in Ukraine could cause shortages of products and services in many parts of the world. Governments will soon begin feeling the effects on trade and commerce.
What is happening? Inflation is going up, and Economic growth is slowing. The Conflict is putting strain on the global supply chain, increasing the prices of precious metals. Both Russia and Ukraine export large amounts of Steel like Titanium.
The world has been trading goods and services more than ever before. According to WITA, Since 1983, global goods exports have risen dramatically from $1.8 trillion to $18.4 trillion. The side effects of this war, like any other, will affect the world.
Europe
Europe has a big dependency on Russian energy; this could manifest as High Energy Prices and higher costs of goods. As Inflation affects the whole world will also affect Europe. Eurozone growth could reduce by 4 %. However, Europe and other developing countries will be less affected by Inflation than the Poor and Developing states. Western
According to the New York Times article, Today, Europe’s reliance on Russia’s gas holds European nations in a compromised position. They continue to buy Russian energy, moving enormous sums of money to Moscow, which is funding the Russian invasion that they denounce.
Developing Countries
A recent report by the UN expressed that African countries could be hit with a shortage of wheat supply due to Russia’s invasion of Ukraine. Most developing countries have a dependence on imported goods.
“The conflict in Ukraine has plunged global food and energy markets into turmoil, raising high food prices even further. Once passed on to domestic markets, these increases will limit people’s access to food.”
-World Food Program-
There is a rising food security threat in Africa and the Middle East, where the government has in place subsidies to help keep food prices low.
The World Largest Economy
The effects on the USA will be less Economic and more diplomatic. The Russian government is at risk of defaulting on its loans, not because there is no money, Russia has the 7th Largest Foreign Reserve. They have the money. Half of Russia’s foreign reserves have been frozen by the west (16% of Foreign Reserves in USD and 32% in Euros)
These sanctions have brought about an old debate, Should countries hold dollar-based Central Bank reserves?. Russian Banks and Financial Entities are turning to the Chinese Yen in this period of Sanctions.
The global distrust in the dollar may be growing, even if conversations around using Alternatives like gold and Crypto to hold foreign reserves and maintain uninterrupted access to Central Bank Funds still hold. Nonetheless, the Dollar remains King.
Conclusion
War does impact society. In a way that cannot be foreseen, the war on Ukraine may affect Global society in the future. There are many ways this war could go; the best way to understand the world’s position is by staying informed.
