Amidst critical conditions on the borders of Ukraine, the global economy is about to be sent on yet another uncertain route.
Russia is the largest wheat exporter in the world. Ukraine is called the breadbasket of Europe. Countries dependent on Russia and Ukraine, will likely suffer from massive food shortages. In addition, some countries are heavily dependent. Egypt imports 70 percent of its wheat from Russia, and Turkey 100 percent.
Turkey is already in the middle of an economic crisis, and this blockage of imports in the country will further deteriorate the conditions.
Europe gets nearly 40 percent of its natural gas and 25 percent of its oil from Russia, and the heating and gas bills are already soaring. Natural gas reserves are at less than a third of capacity, with weeks of cold weather ahead.
The most vulnerable ones will bear the heaviest of burdens. “Poorer people spend a higher share of incomes on food and heating,” said Ian Goldin, a professor at Oxford University.
Impact on India
In our globalized world, the impacts will deeply affect several nations, including India.
Since the war directly and indirectly involves many countries, the implications emerge from the international situation. It is within that framework that the implications for India and its people can be understood.
India is going to see a rise in inflation, which is already high, and also in fuel and food prices. Other prices will also surge because of supply bottlenecks with sanctions against Russia and the war situation.
As Russia and Ukraine are also the top exporters of Sunflower Oil, the prices in India and other countries will soar.
India will be hit harder than others as 90 per cent of the country’s sunflower oil imports are from Russia and Ukraine.
“Supply of Sunflower Oil has got disrupted because of conflict between Russia and Ukraine. India imports 25 lakh tonne of Sunflower Oil annually, of which 70 percent comes from Ukraine, 20 percent from Russia and 10 percent from Argentina”, said B V Mehta, Director of Solvent Extractors Association (SEA).
India depends on imports for critical defence equipment. It will face difficulty in procuring defence equipment since both the rich countries and the Russians will delay deliveries, given their own requirements. This will mean India’s preparation to face China and Pakistan will weaken. China could take advantage of this development and push India harder.
Ukraine – The International “Breadbasket”
In Middle Eastern countries and in Africa, fear of food shortages and price hike have sparked a civil unrest.
Ukraine, long known as the “breadbasket of Europe,” actually sends more than 40 percent of its wheat and corn exports to the Middle East or Africa
Lebanon, which is suffering from one of the worst economic crises in more than a century, imports more than half of its wheat from Ukraine.
Ukraine is also the world’s top exporter of seed oils such as sunflower and rapeseed.
Whether the conflict lasts for days or months, how the Western sanctions are implemented will determine the effects.
“Think about it rolling out in stages, (And) is likely to play out as a slow motion drama” said Julia Friedlander, director of the economic statecraft initiative at the Atlantic Council.
Russia is also one of the greatest exporters of Oil and Gas in Europe. The counties like Poland, Italy among others will face problems to mitigate the lack of supply of Oil and Gas, along with natural Gas, as Russia supplied nearly 40 percent of Europe’s natural gas.
All these factors: uncertainty, demand, supply blockage investment, and inflation , will reduce the economic growth of several nations, already badly hit by the Covid-19 pandemic.
Content writer: Nishant Mishra