The economic impacts of the Ukraine crisis shall remain with us for years to

come

Outline:

(1) Introduction

Thesis statement: “The drastic impacts of the Russian-Ukraine conflict have worsened the
economy of the world in general and Europe in particular which will affect the globe for a long period.

(2) History
 During the cold war Ukraine was the second most populous and home of much of the
union’s agriculture production, and defense industries including black sea feet.
 Ukraine became a battleground in 2014 when Russia annexed Crimea and began arming
separatists in the Donbas region.
(3) Current scenario
 Vladimir Putin has alleged that USA and NATO violated the pledges they made in the
early 1990s to not expand the alliance into the former Soviet bloc.
 Military exercises of Ukraine along with NATO in 2020 enhance the tensions between
the two states which result in the 2022 full scale invasion of Russia.
(4) Russia’s broad interests in Ukraine
 Russia has a deep cultural, economic and political bond with Ukraine.
 Russia relies on the Ukrainian gas pipeline to export it to customers in central and
Eastern Europe.
(5) Economic impacts on the globe
 Russia is the world’s second largest natural gas producer and third largest crude oil
producer.
 Russia is the largest wheat producer in the world while Ukraine is a key producer of corn,
wheat, sunflower, sugar beet, barley and soya bean.
 Russia is a major producer of Palladium, Aluminum, Nickel and Copper while Ukraine export
70% of the world’s Neon gas which is crucial for chip production.
 Many car maker companies such as BMW, VW and Renault announced plants closure due to
high prices of raw materials and chips shortage.
 Rising energy prices also affect the transport energy as fare prices of transport have
increased.
 Russia is a major producer of Lumber, softwood and other forest products.
 Europe is the most vulnerable region because of its reliance on Russian oil and gas.
(6) Conclusion

 The conflicts are inevitable but the blockade of trade supplies causes economic
deprivation of citizens in the world.
 History shows that the life of a layman is affected the most due to conflicts among states. The drastic
impacts of the Russian-Ukraine crisis have worsened the economy of the world in general and Europe in
particular which will affect the globe for a long period. There are the following factors that are impacting
the global economy amid the Ukraine crisis. Russia is the world’s second largest producer of natural gas
which is essential for household uses. Russia and Ukraine both are one of the biggest agrarian states in
the world that export wheat, corn, sunflower and barley. Rare earth metals such as Aluminum, copper,
and Nickel that are used for many purposes such as in the manufacturing of cars are also exported by
Russia. Ukraine exports Neon gas which is used in the processing of chips. Despite it, high energy prices
also affect the transport industry as shortage of oil and gas results in high fares. Russia is also a major
producer of Lumber and softwood used in furniture and decoration pieces. Moreover, the continent of
Europe affects the most because of its reliance on Russian oil and gas. Hence, all of these factors affect
the economy of the globe amid the Russia-Ukraine crisis.

Ukraine was the cornerstone of the USSR before 1991 and archrival of the USA during the cold war.
Behind only Russia, Ukraine was the second most populous and powerful of the fifteen Soviet republics.
Ukraine was the home of agriculture production, defense industries including the black sea fleet and
some nuclear arsenals. Ukraine was so vital to the union that its decision to sever ties in 1991 proved to
be a coup de grace for the ailing superpower. Ukraine became a battleground in 2014 when Russia
annexed Crimea and began arming separatists in the Donbas region in the country’s Southeast. It was
the first time that a European state annexed the territory of another. For many analysts, the hostilities
marked a clear shift in the security environment of Europe. In February 2022, Russia launched a full scale
invasion of Ukraine with the aim of toppling the western aligned government of Zelensky.

Russian leaders, including Putin, have alleged that the USA and NATO repeatedly violated pledges they
made in the early 1990s to not expand the alliance into the former Soviet bloc. Moreover, despite
remaining a non-member of NATO, Ukraine had held military exercises in the zone which enhance the
tensions between the two states. Russia seems it a clear threat to its national security and resulting in
full-scale invasion of Ukraine.

Russia has a deep cultural, economic and political bond with Ukraine as most of its Eastern Ukrainians
are ethnically Russian speaking. After the collapse of the USSR, it was a blunder by Russia to leftover part
of its former territory in the hands of the Western bloc. Russia has also its interests in Ukraine because
of its natural resources and the black sea fleet located in the south of Ukraine which is one of the major
trade routes between Europe and Asia. Moreover, Russia relies on the Ukrainian gas pipeline to export
its gas to central and Eastern Europe for years and pays for it to Kyiv. Hence, Russia has vast political,
economic and geo-strategic interests in Ukraine.

Russian Federation is the world’s second largest natural gas producer and third largest crude oil
producer. Owing to the crisis, Brent oil prices crossed $100 per barrel for the first time since 2014 while
Europe gas prices are reached a record high. As Europe consumes 40% of Russian gas and replacing the
Russian gas supply in a short period will be impossible. Next in few days, it is winter season in Europe
and gas demand will be skyrocketing in household chores. In this crucial time, Europe will have to either
depend on Asia or negotiate with Russia. Russia has also suspended the project of the Nord steam
pipeline which connects Russia with the Germany through Baltic Sea.
Pressure on agriculture commodities prices which were on an upward trend will be exacerbated by the
conflict. Russia is the world’s largest wheat exporter which forms almost 20% of global trade. Despite it,
Ukraine is a key producer of corn, wheat, sunflower, sugar beet, barley and soya. In 2019, Russia and
Ukraine together accounted 25%, 21% and 17% of global export of wheat, barley and corn respectively.
In addition, Russia and Ukraine also export 75% of global sunflower seeds and safflower oil which are
used by both animals and human beings. Therefore, commercial shipping suspended by Ukraine and
blockade of the Azoz Sea by Russia will disrupt the commodities trade. The shortage of all these
commodities results in an increase in prices of meat, flour and other daily uses commodities.

Russia is a major producer of palladium, aluminum, nickel and copper. Palladium is used in catalytic
converters, automobiles and electronic components. Europe is the largest producer of automobiles and
import palladium from Russia. Moreover, Ukraine produces almost 70% of the world’s neon gas. Neon is
pivotal for chip production and all these chips are used in mobiles, computers and other electronic
things. Despite it, aluminum used in houses, cars and airplane windows is all exported by Russia. The
Shortage of all of these metals will result in the shutdown of many industries and the prices of products
made by these metals will increase.

The current situation is strongly impacting the automotive sector due to various shortages of raw
materials such as semiconductors, cobalt, lithium and magnesium. Ukraine automotive factories supply
major car makers in Western Europe. Owing to this many car maker companies such as BMW, VW, and
Renault announced plant closures.

Rising energy prices also affect the transport industry. Airlines and maritime companies are suffering
from high fuel prices. Airlines are most at risk. The USA and Canadian airlines are affected the most
because flights from both countries are not allowed to operate in Russian airspace. Now flights of both
countries have to take long routes for travel which results in an increase of fare prices.

Russia is a major exporter of lumber, softwood and forest products. The European Union and Chinese
wood processing industries mostly rely on Russia. Sanctions on Russia results in cutting the global supply
of lumber and other wood which increased the price of goods made from lumber.

Europe is definitely the most vulnerable region because of its reliance on Russian gas and oil. The higher
prices of gas and oil will affect the other commodities prices. These vulnerabilities vary from country to
country. In Germany, natural gas is the second biggest source of energy and 31.6 million people depend
on gas for household uses. The neighbour countries of Russia such as Poland, Slovakia, Hungry, Latvia
and Romania affected the most because all of these countries are fully dependent on Russian oil and
gas.

As the world is a global village and all countries have to depend upon the trade chains for their
existence. Not any country in the world is self sufficient for its needs. One has to depend on others to
fulfill its needs. So a little distraction in food chain supplies causes inflation and food shortage. In the
contemporary world, the economy of any country decides its position in global politics. At the time of
conflict states mostly put economic sanctions on opponents to suppress them. The Ukraine crisis not
only disturb the supply chains but also caused inflation and food shortage and caused great damage to
the economies of the countries. This essay throws light on the economic consequences of the Ukraine
crisis and its impacts on the global economy. The conflicts are inevitable but the blockade of trade
supplies causes economic deprivation of citizens in the world.