Impact of Russia Ukraine war on daily Necessities of Bangladesh

Contents
Impact of Russia Ukraine war on daily Necessities of Bangladesh ............................................ i

Abstract ....................................................................................................................................... i

Chapter-1.................................................................................................................................... 1

1.1 Introduction: ................................................................................................................ 1

1.2 Compulsory for Academic Purpose: ........................................................................... 1

Global Leadership: ................................................................................................................. 2

1.2.1 Importance of the study: ............................................................................................ 2

1.3. Objectives of the study: ................................................................................................... 3

The objective of this study is to assess the impact of the Russia-Ukraine war on the daily
commodities market in Bangladesh. Specifically, the study aims to: .................................... 3

1 Analyze the price fluctuations and availability of essential commodities in Bangladesh

resulting from the conflict. ..................................................................................................... 3

2 Examine the inflationary pressures and their implications for household affordability
and the overall economy. ....................................................................................................... 3

3 Evaluate the disruptions in global supply chains and their effects on the importation of
energy resources, agricultural products, and industrial raw materials. .................................. 3

4 Investigate the impact of strained trade relations on bilateral agreements and trade
partnerships, and their influence on the daily commodities market. ...................................... 3

5 Explore the challenges faced by industries dependent on imported inputs, including

production delays, increased costs, and limited availability of certain products. .................. 3

6 Identify potential strategies and policy measures to mitigate the negative effects of the
war on the daily commodities market in Bangladesh. ........................................................... 4

7 Provide recommendations for policymakers, stakeholders, and relevant authorities to

ensure a stable, accessible, and affordable daily commodities market for the people of
Bangladesh, taking into account future uncertainties............................................................. 4
 8 By achieving these objectives, this study aims to contribute valuable insights and
recommendations that can inform policy decisions, enhance preparedness for similar
situations, and promote economic stability in the face of global conflicts impacting the
daily commodities market in Bangladesh. ............................................................................. 4

1.4 Limitation: ........................................................................................................................ 4

Chapter-2.................................................................................................................................... 6

2.1 Background of the war ..................................................................................................... 6

2.2 Imported Goods from Ukraine: ........................................................................................ 7

2.3 Imported goods from Russia ............................................................................................ 8

2.4 The-Impact of the War ..................................................................................................... 9

2.5 Exported Goods in Ukraine ............................................................................................ 10

2.6 Exported Goods in Russia .............................................................................................. 12

Chapter-3.................................................................................................................................. 13

3.1 What the Russia-Ukraine war means for Bangladesh’s economy ..................................... 13

3.2 Russia-Ukraine War: Wreaking havoc in Bangladesh’s economy ................................ 15

Chapter-4.................................................................................................................................. 17

4.1 Impacts of the Russia-Ukraine War price shocks on the Bangladesh economy: A
general equilibrium analysis................................................................................................. 17

4.2 Bangladesh: Impacts of the Ukraine and global crises on poverty and food security ... 17

4.3 Russia vs Ukraine War: Impact on Bangladesh’s Economy .......................................... 18

Economic Impact on Bangladesh ......................................................................................... 20

Export ............................................................................................................................... 20

Development Project ........................................................................................................ 20

Global ............................................................................................................................... 21

Chapter-5.................................................................................................................................. 25

5.1 Conclusion:..................................................................................................................... 25

Bibliography & References: .................................................................................................... 26

 Abstract
The Russia-Ukraine war has had a significant impact on the daily commodities market in
Bangladesh, a country heavily reliant on imports for its energy resources, agricultural
products, and industrial raw materials. The conflict has disrupted global supply chains,
leading to increased prices of essential commodities such as oil, gas, and food items. The
resulting inflationary pressures have eroded purchasing power, creating financial challenges
for households. Trade relations with countries involved in the conflict have also been
strained, potentially affecting bilateral agreements and causing further disruptions in the
import market. Additionally, industries dependent on imported inputs have faced difficulties
in sourcing materials, leading to production delays and limited availability of certain
products. To address these challenges, the Bangladeshi government must closely monitor
global developments, diversify import sources, and explore alternative solutions to ensure
stability and accessibility in the daily commodities market.

Keywords: Russia Ukraine War, Effect of War, Necessities Price, Economic Effect of
War.
 Chapter-1

1.1 Introduction:
The Russia-Ukraine war has had far-reaching implications across the globe, with its impact
extending beyond the immediate conflict zone. One country significantly affected by this
ongoing conflict is Bangladesh, which heavily relies on imports for its daily commodities,
including energy resources, agricultural products, and industrial raw materials. As disruptions
in global supply chains and price fluctuations reverberate through international markets,
Bangladesh has experienced notable consequences in its domestic daily commodities market.
This introduction aims to provide an overview of the impact of the Russia-Ukraine war on the
availability, pricing, and accessibility of essential commodities in Bangladesh. By
understanding these effects, policymakers and stakeholders can work towards mitigating the
challenges and finding strategies to ensure a stable and affordable daily commodities market
for the people of Bangladesh.

1.2 Compulsory for Academic Purpose:

Submitting academic term papers is compulsory for academic purposes due to several
important reasons.

Firstly, it allows students to showcase their research skills by demonstrating their ability to
gather information, critically analyze it, and synthesize relevant literature. By exploring a
specific topic, such as the impact of the Russia-Ukraine war on daily commodities in
Bangladesh, students can apply their theoretical knowledge to real-world issues.

Secondly, the requirement promotes critical thinking. Writing an academic paper requires
students to think critically and evaluate different perspectives on the chosen topic. It
encourages them to consider the potential consequences of geopolitical conflicts, analyze
various factors influencing Necessities markets, and explore the interconnectedness of global
supply chains.

Thirdly, academic papers help develop communication skills. Students must present their
findings and arguments in a clear and organized manner, enhancing their ability to effectively
communicate complex information to a specific audience. This includes properly citing
sources and adhering to ethical standards, fostering research ethics and academic integrity.

Moreover, compulsory submission of academic papers contributes to the enhancement of

subject knowledge. Engaging in research and writing on a particular topic, such as the
Russia-Ukraine war, allows students to delve deeper into various aspects of the conflict and
its potential consequences. This expands their understanding of international relations,
economics, and trade dynamics. Additionally, the requirement serves as a means to assess
learning outcomes. Educators can evaluate students' comprehension of the subject matter,
their ability to critically analyze complex issues, and their communication skills through the
evaluation of submitted papers. This helps measure students' academic progress and mastery
of the learning objectives.

In conclusion, the compulsory submission of academic papers for academic purposes is

essential as it fosters research skills, promotes critical thinking, develops communication
abilities, encourages research ethics, enhances subject knowledge, and assesses learning
outcomes. It is an integral part of the educational experience, enabling students to
demonstrate their understanding, contribute to their academic growth, and showcase their
academic abilities.

Global Leadership:
Global leadership refers to the ability to influence and guide individuals, organizations, and
nations on a global scale towards common goals and shared values.

1.2.1 Importance of the study:

Understanding the impact of the Russia-Ukraine war on the daily commodities market in
Bangladesh is of significant importance for several reasons:

 Economic Stability: The daily commodities market plays a crucial role in the overall
economic stability of Bangladesh. By examining the effects of the war on Necessities
prices, supply chains, and trade relations, policymakers can develop strategies to mitigate
inflationary pressures, maintain affordability, and promote economic resilience.

 Household Affordability: The availability and affordability of essential commodities

directly impact the daily lives of individuals and households. By studying the impact of
the war, policymakers can identify potential interventions to ensure that basic necessities
remain accessible and affordable for the general population, particularly those with lower
incomes.

 Policy Formulation: The findings of this study can inform policymakers in formulating
effective policies and strategies to address the challenges posed by the Russia-Ukraine
war. It can guide decision-making processes related to diversifying import sources,

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 strengthening domestic production, and establishing contingency plans to mitigate
disruptions in the daily commodities market.

 Trade Relations: Understanding the impact of the conflict on trade relations can help
Bangladesh identify alternative markets and foster new trade partnerships. This
knowledge can assist in developing resilient trade networks and reducing dependence on
countries directly affected by the war, ensuring a more stable and diversified import
market.

 Future Preparedness: By analyzing the current impact of the war on the daily
commodities market, Bangladesh can better prepare for similar situations in the future.
This study can serve as a foundation for developing risk management strategies,
enhancing domestic production capabilities, and building resilience in the face of global
conflicts or disruptions.

Overall, this study's importance lies in its potential to provide valuable insights into the
consequences of the Russia-Ukraine war on the daily commodities market in Bangladesh. By
understanding these effects, stakeholders can work towards implementing measures to
mitigate challenges, maintain economic stability, and ensure the well-being of the population.

1.3. Objectives of the study:

The objective of this study is to assess the impact of the Russia-Ukraine war on the daily
commodities market in Bangladesh. Specifically, the study aims to:

1 Analyze the price fluctuations and availability of essential commodities in Bangladesh

resulting from the conflict.

2 Examine the inflationary pressures and their implications for household affordability and
the overall economy.

3 Evaluate the disruptions in global supply chains and their effects on the importation of
energy resources, agricultural products, and industrial raw materials.

4 Investigate the impact of strained trade relations on bilateral agreements and trade
partnerships, and their influence on the daily commodities market.

5 Explore the challenges faced by industries dependent on imported inputs, including

production delays, increased costs, and limited availability of certain products.

3
6 Identify potential strategies and policy measures to mitigate the negative effects of the
war on the daily commodities market in Bangladesh.

7 Provide recommendations for policymakers, stakeholders, and relevant authorities to

ensure a stable, accessible, and affordable daily commodities market for the people of
Bangladesh, taking into account future uncertainties.

8 By achieving these objectives, this study aims to contribute valuable insights and
recommendations that can inform policy decisions, enhance preparedness for similar
situations, and promote economic stability in the face of global conflicts impacting the
daily commodities market in Bangladesh.

1.4 Limitation:
While conducting a study on the impact of the Russia-Ukraine war on the daily commodities
market in Bangladesh, it is important to acknowledge the following limitations:

 Data Availability: The availability and reliability of data related to the specific
impact of the war on the daily commodities market in Bangladesh may pose
limitations. Data collection and access to comprehensive information on price
fluctuations, supply chain disruptions, and trade relations could be challenging,
potentially limiting the depth of analysis.

 Time Sensitivity: As the conflict is ongoing, the study's findings are based on the
available information up until the knowledge cutoff date of September 2021.
Therefore, the study may not capture the latest developments or immediate impacts of
the war, as the situation is subject to change.

 Scope and Generalizability: This study focuses specifically on the impact of the
Russia-Ukraine war on the daily commodities market in Bangladesh. The findings and
conclusions may not be directly applicable to other countries or regions facing
different geopolitical dynamics or having distinct economic structures.

 Complex Interdependencies: The daily commodities market is influenced by various

factors, including domestic policies, global market trends, and other international
events. Isolating the impact of the Russia-Ukraine war solely on the daily
commodities market in Bangladesh may be challenging due to these complex
interdependencies.

4
  External Factors: Other external factors, such as natural disasters, political
instability, or economic fluctuations, can also influence the daily commodities market
in Bangladesh. It is important to acknowledge that the impact of the war may interact
with or be overshadowed by these external factors, limiting the attribution of specific
effects to the conflict alone.

Despite these limitations, this study aims to provide valuable insights into the impact of the
Russia-Ukraine war on the daily commodities market in Bangladesh and generate
recommendations to address the challenges arising from this conflict.

5
 Chapter-2

2.1 Background of the war

The ongoing war between Russia and Ukraine has had significant impacts on various aspects
of global geopolitics and the global economy. While Bangladesh is not directly involved in
the conflict, it can still experience some indirect effects on its daily commodities due to the
war.

Background of the War:

The conflict between Russia and Ukraine can be traced back to 2014 when Russia annexed
Crimea, a region previously under Ukrainian control. This move was met with international
condemnation, leading to tensions between the two countries. The situation further escalated
when pro-Russian separatists in eastern Ukraine declared independence, leading to a full-
scale armed conflict.

The war has been marked by intense fighting, ceasefire violations, and the loss of thousands
of lives. Ukraine has accused Russia of supplying military support to the separatist groups,
while Russia denies direct involvement, claiming it is supporting the rights of Russian-
speaking populations in Ukraine.

The war has had severe humanitarian consequences, including the displacement of thousands
of people and damage to infrastructure. It has also strained relations between Russia and
Western countries, resulting in economic sanctions on Russia and counter-sanctions from
Russia.

Impact on Daily Commodities in Bangladesh:

While Bangladesh may seem geographically distant from the conflict, it can still experience
indirect impacts on its daily commodities due to the interconnected nature of the global
economy. Some potential effects include:

Energy Prices: Ukraine is an important transit country for Russian natural gas exports to
Europe. Any disruption in the supply or an increase in tensions can lead to fluctuations in
global energy prices. Bangladesh, being an energy-importing country, may experience
changes in the prices of oil and gas, which can affect daily Necessities costs.

6
Trade Relations: The war has strained relations between Russia and Western countries,
leading to economic sanctions and counter-sanctions. These measures can impact global trade
dynamics, including export and import flows. If there are disruptions in trade routes or
changes in trade policies, it may indirectly affect conflict has also had a ripple effect on
global Necessities markets, as Russia is a major exporter of natural gas, oil, and other
commodities. In addition, Ukraine is an important transit country for Russian gas exports to
Europe.

The tensions between Russia and Ukraine have led to disruptions in the supply of natural gas
to Europe, causing prices to spike. Bangladesh, which is a net importer of natural gas, has
also been affected by the rising global prices.

Overall, the ongoing conflict between Russia and Ukraine has had a significant impact on
global Necessities markets, including in Bangladesh, and is likely to continue to do so in the
foreseeable future.

2.2 Imported Goods from Ukraine:

Here's a list of commonly imported goods that are traded between countries:

1 Machinery and equipment: This includes industrial machinery, electrical machinery,

mechanical appliances, computers, and other technological equipment.

2 Vehicles and automotive parts: Cars, motorcycles, trucks, and their components are
frequently imported goods.

3 Electronics: Televisions, smartphones, tablets, laptops, cameras, and other consumer

electronics are commonly imported.

4 Pharmaceuticals and medical equipment: Medicines, vaccines, medical devices,

surgical instruments, and healthcare equipment are often imported to meet healthcare
needs.

5 Textiles and apparel: Clothing, fabrics, yarn, and accessories are frequently imported
goods in the fashion and textile industry.

6 Chemicals: Various chemicals, including industrial chemicals, fertilizers, pharmaceutical

ingredients, and specialty chemicals, are commonly imported.

7
7 Petroleum products: Crude oil, gasoline, diesel, and other petroleum products are often
imported due to energy demands.

8 Food and beverages: Imported food items such as fruits, vegetables, seafood, dairy
products, spices, and beverages meet consumer preferences and demand for diverse
culinary experiences.

9 Raw materials: Imported raw materials like metals, minerals, wood, and agricultural
commodities serve as inputs for manufacturing and production processes.

10 Consumer goods: Household items, furniture, toys, cosmetics, and personal care
products are imported to meet consumer demands.

Please note that this is a general list, and the specific goods imported from Ukraine to
Bangladesh may vary based on market demand, trade agreements, and bilateral relations
between the two countries. It's essential to research the specific goods you are interested in
importing to ensure compliance with regulations and market suitability.

2.3 Imported goods from Russia

When importing goods from Russia to Bangladesh, there are various products that are
commonly traded between the two countries. Here's a list of some goods that are frequently
imported from Russia to Bangladesh:

1 Petroleum and energy products: Russia is known for its significant oil and gas reserves,
and Bangladesh imports petroleum products like crude oil, natural gas, and refined
petroleum products.

2 Fertilizers: Russia is a major producer of fertilizers, including nitrogen-based fertilizers

like urea and ammonia. Bangladesh imports fertilizers to support its agricultural industry.

3 Metals and minerals: Russia has abundant reserves of metals and minerals. Bangladesh
imports products like iron and steel, aluminum, copper, nickel, and various ores from
Russia.

4 Machinery and equipment: Russian machinery and equipment, such as industrial

machinery, heavy machinery, and specialized equipment, are imported by Bangladesh to
support its manufacturing and infrastructure sectors.

8
5 Chemicals: Russia produces a wide range of chemicals, including industrial chemicals,
organic chemicals, dyes, and pigments. These products are imported by Bangladesh for
various industrial applications.

6 Pharmaceuticals: Russia produces a range of pharmaceutical products, including

medicines and medical supplies. Bangladesh imports pharmaceuticals from Russia to
meet its healthcare needs.

7 Defense equipment: Russia is a significant supplier of defense equipment and weapons.

Bangladesh imports military hardware and equipment from Russia for its armed forces.

8 Wheat and grains: Russia is one of the world's largest exporters of wheat and grains.
Bangladesh imports wheat and other grains to meet its food requirements.

9 Timber and wood products: Russia has extensive forest resources, and Bangladesh
imports timber and wood products like logs, sawn timber, and plywood.

10 Consumer goods: Russia exports various consumer goods like clothing, footwear,
electronics, and household items to Bangladesh.

Please note that this list is not exhaustive, and the actual goods imported from Russia to
Bangladesh may vary based on market demand, trade agreements, and bilateral relations
between the two countries. It's crucial to research the specific goods you intend to import and
comply with the relevant regulations and requirements.

2.4 The-Impact of the War

The war between Russia and Ukraine has had several significant impacts on various aspects
of daily life, both in the region itself and globally. Here are some key impacts of the war:

 Humanitarian Crisis: The conflict has resulted in a severe humanitarian crisis in

Ukraine, with thousands of people killed and millions displaced from their homes.
The war has caused immense suffering, loss of life, and displacement of civilians,
leading to a need for humanitarian aid and assistance.

 Economic Consequences: The war has had detrimental effects on the economies of
both Russia and Ukraine. The fighting has damaged infrastructure, disrupted
industries, and led to a decline in investment and trade. Economic sanctions imposed

9
 by the international community have further exacerbated the economic challenges
faced by both countries.

 Energy Supply Disruptions: Ukraine is an important transit country for Russian

natural gas exports to Europe. The tensions between Russia and Ukraine have resulted
in disruptions in the energy supply, leading to higher prices and concerns about
energy security. These disruptions have had a global impact on energy markets,
affecting countries reliant on natural gas imports, including Bangladesh.

 Trade and Necessities Prices: The conflict has had an impact on global Necessities
prices. Ukraine is a major exporter of commodities such as wheat, corn, and
sunflower oil. The disruptions in agricultural production and transportation have led
to lower exports and higher prices, affecting global food markets. Bangladesh, as an
importer of commodities, has experienced the impact of these price fluctuations.

 Geopolitical Consequences: The war has had far-reaching geopolitical

consequences, impacting international relations and regional stability. It has strained
relations between Russia and Western countries, leading to increased tensions and a
reevaluation of alliances. The conflict has also raised concerns about the sovereignty
of nations and the sanctity of international borders.

 Security Concerns: The war has created security concerns not only in Ukraine but
also in neighboring countries. The conflict has sparked fears of further territorial
disputes and destabilization in the region. It has also raised concerns about the use of
force and the violation of international norms and agreements.

Overall, the war between Russia and Ukraine has had a profound impact on various aspects
of daily life, including humanitarian, economic, energy, trade, geopolitical, and security
consequences. These impacts continue to be felt both within the region and globally, shaping
political dynamics and influencing socio-economic conditions.

2.5 Exported Goods in Ukraine

Bangladesh exports a variety of goods to Ukraine. While the specific product mix may vary
over time, here are some common goods that Bangladesh exports to Ukraine:

10
2 Ready-made garments: Bangladesh is renowned for its garment industry, and ready-
made garments, including knitwear and woven clothing, are among the major exports to
Ukraine.

3 Textile products: Apart from garments, Bangladesh exports various textile products such
as fabrics, yarn, and home textiles to Ukraine.

4 Jute and jute goods: Bangladesh is the world's largest producer of jute, and jute and jute
goods, including bags, rugs, and textiles, are exported to Ukraine.

5 Leather and leather goods: Bangladesh exports leather products like footwear, bags,
wallets, and other leather accessories to Ukraine.

6 Pharmaceuticals: Bangladesh's pharmaceutical industry has experienced significant

growth, and pharmaceutical products, including generic medicines and healthcare
supplies, are exported to Ukraine.

7 Agricultural products: Bangladesh exports agricultural products such as fruits,

vegetables, tea, and spices to Ukraine, catering to the demand for quality food products.

8 Ceramics and pottery: Bangladesh's ceramics industry produces a range of ceramic

products like tiles, sanitary ware, and tableware, which are exported to Ukraine.

9 Frozen fish and seafood: Bangladesh exports frozen fish and seafood products to
Ukraine, including shrimp, prawns, fish fillets, and other marine products.

10 Handicrafts: Handicraft items like traditional artwork, pottery, baskets, and handmade
products from Bangladesh are also exported to Ukraine.

11 Engineering products: Bangladesh exports engineering goods such as machinery parts,

electrical equipment, and other engineering products to Ukraine.

It's worth noting that the product mix and trade dynamics can change over time due to market
demand, trade policies, and bilateral agreements between Bangladesh and Ukraine. If you're
specifically interested in exporting goods from Bangladesh to Ukraine, it's recommended to
research the current trade regulations, market trends, and preferences in both countries to
identify the most suitable products for export.

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2.6 Exported Goods in Russia
1. Russia is a large and diverse country with a wide range of exports. Some of the
commonly exported goods from Russia include:

2. Energy products: Russia is one of the world's leading exporters of energy products.
It exports significant quantities of crude oil, natural gas, and refined petroleum
products to various countries.

3. Metals and minerals: Russia is rich in mineral resources and exports various metals
and minerals, including iron, steel, aluminum, copper, nickel, platinum, gold, coal,
and various ores.

4. Chemicals and petrochemicals: Russia produces and exports a range of chemicals,

including fertilizers, industrial chemicals, plastics, polymers, and pharmaceutical raw
materials.

5. Machinery and equipment: Russian machinery and equipment, such as industrial

machinery, heavy machinery, agricultural machinery, and transportation equipment,
are exported to many countries.

6. Arms and defense equipment: Russia has a significant arms industry and exports
defense equipment, military hardware, and weapons systems to various nations.

7. Agricultural products: Russia exports agricultural products such as wheat, barley,

corn, sunflower oil, soybeans, meat, poultry, and dairy products.

8. Timber and wood products: Russia has vast forest resources, and it exports timber,
sawn timber, plywood, and other wood products.

9. Automobiles and automotive parts: Russia has a growing automotive industry and
exports vehicles, automotive components, and spare parts.

10. Aerospace and aviation products: Russia has a strong presence in the aerospace
industry and exports aircraft, helicopters, spacecraft, and related components.

11. Consumer goods: Russian consumer goods, including clothing, footwear, electronics,
home appliances, and food products, are exported to various markets.

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 Chapter-3
3.1 What the Russia-Ukraine war means for Bangladesh’s economy

Since the war between Russia and Ukraine began on February 24, 2022, the global economy
has entered a new terrain of uncertainty. The war-induced challenges have surfaced on
various fronts. With global economic integration, a crisis of such nature, which involves a
country like Russia, is bound to impact other economies.

The Russian invasion of Ukraine has happened at a time when the world had just started to
recover from the fallout caused by more than two years of the Covid-19 pandemic. But the
recovery is facing inflationary pressure due to supply shortages in the face of higher
demands, as countries begin to expand economic activities. The ongoing war has created a
new shock for the world. Supply disruptions and financial sanctions pose serious economic
challenges. With no signs of reconciliation between Russia and Ukraine, the global economic
implications will be much more severe.

Major countries including the US, the UK and Japan, and the European Union (EU), have all
suspended economic ties with Russia. Sanctions have been enforced on Russian financial
institutions to disrupt transactions with the country. As Russia is the third largest oil-
producing country in the world, the global economy is suffering from high oil prices. Though
developed countries are sourcing their requirements from other oil-producing countries, small
and poor countries are finding it difficult, with their limited financial abilities, to meet their
energy requirements. In addition, high oil prices have a knock-on effect on other prices,
leading to further inflationary pressure.

The ramifications of these challenges are seen in higher Necessities and oil prices. Food
prices have skyrocketed. Petroleum prices have been on the rise for quite some time. The war
has pushed them upwards.

Depending on the duration of the war, its impact at country level will depend on the
economic links with Russia and Ukraine, and their exposure to the global economy.

Bangladesh is already feeling the heat of the Russia-Ukraine war in many ways. If the war
continues for a longer period, the impact will intensify. We are feeling the impact through
reduction in exports and rise in import bills. Being an oil-importing country, Bangladesh is
already feeling the pressure through high import payments. The Bangladesh Petroleum
Corporation (BPC) reported that it was losing about Tk 19 crore per day. With high oil prices,
13
the chain effect is felt through a hike in the prices of gas, fertiliser, and other essentials. The
government raised diesel prices in November 2021 by about 23 percent, which has already
been reflected in the high transport costs and prices of other essential items.

In addition to fuel prices, costs of other imported products have also gone up significantly.
This will push the production costs up, resulting in higher prices for consumers. Global
sanctions on Russia implies that Bangladesh’s trade with Russia is going to be affected.
Russia is a market for Bangladesh’s ready-made garment (RMG) products. In FY2021,
Bangladesh’s export to Russia was to the tune of USD 550 million, and imports from Russia
amounted to USD 480 million. Bangladesh imports wheat and maize from Russia. Sanctions
mean Bangladesh will have to import these items from somewhere else.

Russia is also implementing several projects in Bangladesh. The Rooppur Nuclear Power
Plant (RNPP) is a large project being implemented by Russia that involves USD 12.65 billion
and is scheduled to be completed by 2025. The ongoing war and economic sanctions against
Russia could delay this expensive project, which means cost escalation in Bangladesh. This
implies higher loans and burden on the country.

The balance of payment will be under pressure due to high prices and trade sanctions. At the
end of January of FY2021-22, the current account deficit reached USD 10 billion due to an
increase in import payments and reduction in remittances. If the high current account deficit
persists for a longer period, the exchange rate will also fall under pressure.

Policymakers in Bangladesh will have to monitor the market closely. The country should
quickly source commodities from the global market at competitive prices, and distribute
essential commodities at reduced prices through open market sales. Prudent macroeconomic
management will be required to create fiscal space. As the government is in the process of
formulating the budget for FY2022-23, it should allocate adequate resources for social safety
net programmes at a larger scale for poor and low-income families. In this respect, subsidies
for critical commodities, such as fuel, power and agriculture, need to continue for a few
months. The economic recovery will depend on the extent of public expenditure. However,
waste of public resources and unnecessary public expenditure should be curtailed. Efforts
should be given to expedite projects that are near completion, rather than initiate new ones.
The government should carefully use its foreign currency as import payments continue to rise
in the uncertain period of war and beyond.

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3.2 Russia-Ukraine War: Wreaking havoc in Bangladesh’s economy
February 24th marked one year since the Russian invasion of Ukraine. Although the war took
place some 5800 kilometers away, the maelstrom laid bare upheaval in the country’s
economic and financial sectors. The severity of the blow of the war was duly felt
when Foreign Minister A.K Abdul Momen summoned at the world leaders orating, “The war
should stop, and G20 nations should try their best to stop the war”, at the G20 Foreign
Ministers Meet in New Delhi, of March 2023. With the onset of war, the price of global
commodities has spiked resulting negative impact on both macro and microeconomic
dimensions of the country.

Ever since the war began on February 24, inflation averaged 8.14 percent, way higher than
the reasonable 5 percent. With this, the taka has depreciated by about 25 percent and reserves
have shrunk by about 28 percent. Furthermore, BDT lost value against the dollar by 10.08%.
Since the advent of war, during the first nine months (July-March) of the 2021-22 fiscal
year import payments increased by 44% whereas export income increased by 33% and
remittances has fallen by 18%. Being a trading country and highly import dependent for fuel
and industrial raw materials, many companies have been facing trouble in opening LCs since
banks are unwilling to open LCs due to forex shortages.

Bilateral trade with Russia, US$1.14 billion in the last fiscal year (FY21), is small compare
to Bangladesh’s total global trade worth US$ 104.35 billion. Understandably, disruption in
trade, especially export, will be costly. In the last fiscal year, Bangladesh exported $665.30
million to Russia of which around 95 per cent was textile and clothing. Due to war, it has
been difficult to continue the export as cost of shipping has likely surged. Bangladeshi
exports to Russia started falling in March 2022 and it is likely to fall drastically in fiscal
year (FY) 2022-2023.

The more challenging has been retaining the export receipts as the United States (US) along
with European Union (EU) has imposed sanctions on Russian banks to cut off the country
from the global financial system.

The negative impact of the financial sanction on Russia will disrupt the Rooppur nuclear
power plant project, the largest project with Russian credit in Bangladesh worth US$ 11.38
billion. Already the Russian bank, Bank for Development and Foreign Economic Affairs
(VEB) has asked Sonali Bank, which transacts the fund for the project to hold up transactions

15
for the time being. The Russian counterpart is facing sanctions regarding the SWIFT’s
service.

Where the global Necessities price have hiked, the net income of industrial workers
has decreased to 30-40 percent since the inception of the war due to inflation, according to
Anu Mohammad, a former professor of Jahangirnagar University’s economics department.

In order to combat the economic stagnation, Bangladesh Bank is on the lookout for an
alternative payment system for carrying out smooth trade and commerce between Dhaka and
Moscow. Russian has a few experimental international transaction method employing
bartering, cryptocurrency with Brazil, Indonesia and a few of the African countries. The
Russian authorities and companies are inventing new ways to stop relying on dollars and
euros and increasingly turning to Chinese yuan and Bangladesh is considering to opt for the
alternative method to get the economic wheel moving.

Bangladesh has been walking on a tightrope at the geopolitical front. Recently, Bangladesh
has found herself in hot waters regarding the issue of Russian ship Ursa Major, among the 69
ships facing western sanction. Bangladesh, in line with the sanctions has agreed not to allow
any of the ships targeted by the sanctions from sailing into Bangladesh waters. The ship
carrying much needed raw materials for Bangladesh’s Rooppur nuclear power plant, was not
allowed into Bangladesh by Dhaka, clearly under pressure from the US authorities. The move
did not make President Putin and his government happy. The outcome was the summoning of
Kamrul Ahsan, Bangladesh’s Ambassador to Russia to the Foreign Ministry in Moscow.

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 Chapter-4

4.1 Impacts of the Russia-Ukraine War price shocks on the Bangladesh

economy: A general equilibrium analysis
The spike in global Necessities prices caused by the Russia-Ukraine war has had major
adverse impacts on many developing countries, including Bangladesh, that still depend
heavily on energy and food imports. Although the Bangladesh economy has rebounded after
the COVID-19 pandemic, the latest global trade shock has threated to increase food
insecurity and poverty. This study utilizes the Bangladesh RIAPA economywide model to
assess the impact of increases in global Necessities prices and explores potential policy
interventions to reduce negative impacts. Simulation results show that increases in
international Necessities prices create a GDP loss of 0.36 percent and an increase of three
million in the number of poor (mainly rural poor). Energy price shocks account for most of
this decline in real GDP (0.28 percent). The fertilizer subsidy helps spur agriculture
production which leads to an increase in crop GDP by 0.78 percent and total agricultural
GDP by 0.43 percent. Changes in policy could help mitigate the effects of these price shocks.
In particular, petroleum subsidies would help increase production in both agriculture and
services, leading to a 0.3 percent increase in household consumption, considerably more than
the gain under a targeted cash transfer policy of equal cost. However, given that the
petroleum subsidy does not specifically target the poor, it only reduces poverty by a fraction
of what a targeted cash transfer would. Moreover, as illustrated by the experiences of other
countries, increases in a fuel subsidy, once introduced, are likely to be very difficult to
reverse. This suggests that if the major policy goal is to reduce poverty, a direct cash transfer
would be more effective than the other policy options considered here. Combining these
policies, however, would be even more effective than any single intervention, reducing
poverty incidence by around 2.5 million people, and thereby preventing nearly all of the
potential increase in poverty resulting from global price shocks.

4.2 Bangladesh: Impacts of the Ukraine and global crises on poverty and
food security
Global food, fuel, and fertilizer prices have risen rapidly in recent months, driven in large part
by the fallout from the ongoing war in Ukraine and the sanctions imposed on Russia. Other
factors, such as export bans, have also contributed to rising prices. Palm oil and wheat prices
increased by 56 and 100 percent in real terms, respectively, between June 2021 and April
17
2022, with most of the in-crease occurring since February. Wide variation exists across
products, with real maize prices increasing by only 11 percent and rice prices declining by 13
percent. The price of crude oil and natural gas has also risen substantially, while the weighted
average price of fertilizer has doubled. With these changes in global prices, many developing
countries and their development partners are concerned about the implications for economic
stability, food security, and poverty.

4.3 Russia vs Ukraine War: Impact on Bangladesh’s Economy

Russia is one of the world’s superpowers and the 11th largest country in terms of GDP. In
terms of gas production, the country was the second-largest in the world in 2021, with 17-
percent of the world’s total output and 12 percent of the world’s total oil production, the
third. Russia exports coal, gold, fertilizers, and other metals in addition to gas and oil.
Although Russian forces launched a full-scale attack on Ukraine on the 24th of February,
Russia has been preparing for the attack on Ukraine for months. Russian military forces,
tanks, artillery, and other military movements were seen very close to the Ukrainian border in
the satellite image. Countries in the western bloc, including the USA, UK, Germany &
European Union, threatened Russia with various sanctions.

However, despite all these threats, Russia invaded Ukraine, and the United States and its
Western allies have imposed a number of economic sanctions on Russia. Alongside the
sanctions from the world’s numerous countries, SWIFT, the world’s cross-border payment
network, also banned seven banks, including the Central Bank of Russia, disrupting the
country’s banking and international trade.

The war has affected global oil and gas prices, as well as wheat, corn, sunflower, and various
precious metals. The global impact of the Russia-Ukraine war is also being felt in
Bangladesh. Suppose the dispute between Ukraine and Russia continues for a long time and
spreads across Europe. In that case, the country’s garment industry could be threatened as
64% of the country’s garment exports, and 58% of the total exports are destined for the
European market.

President Vladimir Putin of Russia blamed Ukraine’s membership in NATO for Russia’s
invasion of Ukraine. Russia has long opposed Ukraine’s accession to the European Union and
NATO. In 2014, Ukraine’s then-president Viktor Yanukovych was ousted by the public over
his pro-Russian stance, which prompted Russia to occupy Crimea part of Ukraine as a sign of
power. Since then, Ukraine has been trying to join the European Union and NATO to
18
preserve its sovereignty. Russia and Ukraine, meanwhile, have been at loggerheads over
claims that NATO’s military alliance has moved closer to Russia’s borders.

Following Russia’s invasion of Ukraine, Western nations have imposed a number of

sanctions on Russia. According to a BBC report, the USA and Western countries have frozen
almost half of Russia’s central bank’s $630 billion foreign currency reserves, leaving the
Russian currency, the ruble, devalued against the US dollar. As a result, Russia’s inflation
rate has risen by 14-percent.

However, sanctions against the Central Bank of Russia and several commercial banks and the
ban on transactions using the SWIFT network were the most impactful. In addition to the
state powers, private corporations worldwide have also announced the closure of their
activities and services in Russia. These private corporations include consumer payment
network providers like Visa, Mastercard, Amex, as well as car manufacturers like Renault,
Volvo, Daimler Truck, Toyota, General Motors, smartphone makers like Nokia, Apple,
Samsung, tech companies like Microsoft, Google, Netflix, TikTok, Spotify and many more
organizations including global restaurant chain McDonald’s, Yum Brands, Starbuck.

As a result, the Russian currency lost value against the dollar, and inflation rose. At present,
the exchange rate is 85 rubles per dollar, but on March 7, it was 151 rubles per 1 dollar.
Russia had a foreign exchange reserve valued at 640 billion, mainly in dollars, euros, yuan,
and gold. In a March 13, 2022, interview on Russian state television, Russia’s finance
minister said that Russia’s 300 billion foreign reserves had been frozen since the Western
sanctions, which is one of the reasons behind the devaluation of the ruble and rising inflation.
The country’s central bank has raised interest rates to 20 percent to overcome this. As a result
of the war, the price of unrefined oil in the world market has reached its highest level in the
last 14 years. In addition, the retail price of gas has almost doubled. Its impact is being felt in
all the economies of the world, big and small.

The impact of the Russia-Ukraine conflict is also being felt in Bangladesh. Russia and
Ukraine have trade and import trade relations with Bangladesh. Due to the closure of Swift in
Russia, many payments were blocked, and shipping with Russia was reduced, so new orders
were canceled. Besides, Russia is directly involved in Bangladesh’s first nuclear power plant
mega project. Russia is providing technical assistance as well as financial assistance for this
project. Sanctions on SWIFT and Russia’s central bank have raised concerns about the loan.

19
But will the conflict between Russia and Ukraine have any impact on Bangladesh’s economy
in the long run?

Economic Impact on Bangladesh

Export
One of the largest export regions of Bangladesh is Europe. Fifty-eight percent of
Bangladesh’s total exports are exported to the European Union region countries. In
comparison, the total export income of Bangladesh from Russia in the fiscal year 2019-20 is
1.72 percent. RMG products accounted for more than 91-percent of Bangladesh’s exports to
Russia.

Over the past decade, Bangladesh’s exports to Russia have increased every year. In the 2011-
12 fiscal year, Bangladesh’s exports to Russia amounted to more than $133 million (133.25),
which a decade later stood at more than $665 million (665.32).

Development Project
Rooppur Nuclear Power Plant is Bangladesh’s first nuclear power plant. The estimated cost
of this project is estimated at 1 lakh 13 thousand crores. According to the BBC, 90 percent of
the total funding for the project is provided by Russia’s VB Bank as loan assistance.
However, in the wake of the Russia-Ukraine war, several Russian banks, including the state-
owned VB Bank, have been banned from Western countries. Ahsan H. Mansoor, executive
director of the Policy Research Institute of Bangladesh, said: “In the current context of the
war, Russia will not be able to fund the Rooppur nuclear power plant in Bangladesh.”

However, Ziaul Hasan, senior secretary at Bangladesh’s Ministry of Science and Technology,
said: “The project currently employs about 6,000 workers from Russia, Ukraine, and
Kazakhstan, as well as about 26,000 workers, including Bangladeshi workers, who have not
yet had any problem paying.” Besides, the Bangladesh government thinks that since Russia is
working on the project itself, Russia will be able to provide loans from other banks even if its
state-owned VEB Bank is banned.

Also, during the war this year, on the 13th of March, a special cargo flight from Russia sent
84 tons of cargo to Bangladesh, which will be used for the Rooppur nuclear power plant. This
suggests that even if Western countries try to create obstacles for Russia, the work of the
Russian-backed Rooppur project in Bangladesh will not be a problem. Mohammad Shawkat

20
Akbar, director of Nuclear Power Plant Company Bangladesh Ltd, also clarified the closure
of SWIFT. After the approval of these documents, Sonali Bank of Bangladesh distributes
money for the project.

Global
In terms of edible oil, Bangladesh has an annual demand of 2 million tons of edible oil,
against which Bangladesh produces only 0.2-0.3 million tons. This means that Bangladesh
has to import the remaining 90 percent of the oil. Although Bangladesh procures minimal oil
seeds from Russia and Ukraine, most edible oil is imported from Argentina, and soybean
seeds are imported from Brazil. According to a report in The Daily Star, the price of soybean
oil, which was $1,460 per tonne in January 2022, rose to $1,598 the following month. Many
countries have stopped importing oil from Russia due to the Ukraine-Russia war. As a result,
the oil price in the world market has increased several times.

Meanwhile, the demand for edible oil during Ramadan will be around 3 lakh tonnes, just like
every year. During Ramadan, the oil price per liter increases every time in Bangladesh. Due
to the war, if the edible oil price continues to rise around the world, there is a possibility of a
further increase in Bangladesh, which will have an adverse effect on the country’s economy.

Just like the case of edible oil, in the case of fuel, the price of crude oil in the international
market during the pandemic, which was only $50 per barrel, has now come down to $139 in
2022. In addition, energy experts and economists are expecting the price to rise to $200.
Russia is the third-largest producer of fuel oil in the world. If the price of fuel oil in the global
market continues to rise at this rate, it will impact Bangladesh as well. Because according to
energy expert Professor M Tamim, 40 percent of the total energy of Bangladesh has to be
imported. Therefore, importing oil at higher prices will increase oil prices per liter. If oil
prices rise again, the cost of transportation and electricity in the country will increase further,
significantly hurting the country’s economy.

Professor M Tamim advised the Government of Bangladesh to take several diplomatic

initiatives to avoid such a situation and keep Necessities prices under control. He further said
that an agreement has to be reached with all the countries where Bangladesh imports oil, gas,
and other commodities.

21
In addition, Mustafizur Rahman, Honorary Fellow of the Center for Policy Dialogue, advised
the government to increase surveillance in the domestic market and bargaining in the
international market.

Russia has also banned Russian airspace for 32 countries, including the European Union and
Canada, following the announcement of a complete shutdown of Russian aviation in
European Union airspace over the war in Ukraine. This has increased the distance of
Bangladesh’s transport in import and export of goods to several Asian countries and distant
countries outside Asia, along with increased transportation costs in import and export.

In such a world market situation, instability is also being noticed in Europe and the US
economy. As a result of the war, the rising prices of various commodities, including oil and
gas, have put pressure on the economies of these countries, which will reduce the purchasing
power of the people. In addition to EU countries, Bangladesh generates 75.73% of export
earnings from USA, Canada and UK.

If the purchasing power of the people of these countries decreases, the amount of import from
Bangladesh will also decrease. The biggest blow will come to the country’s RMG sector
because 64% of the exports of the RMG sector are generated from the countries of the
European Union.

Considering all these, it is easy to see that the Ukraine-Russia war is not just a war between
two countries but a kind of economic warfare that impacts the whole world. Due to the global
impact, the war will have a considerable impact on Bangladesh as well.

"The change in diet wrecked my health," said the owner of a small grocery shop at Sirajgang
Sadar.

The doctor has advised him to move back to his previous wheat-based diet, which he can ill
afford thanks to elevated inflation and the 41.5 percent price hike of loose flour in the past
year.

Since the war began on February 24, inflation averaged 8.14 percent, way higher than the
reasonable 5 percent.

The elevated price level means Chisty, an SME entrepreneur in Dhaka, is unable to replace
his wife's stolen smartphone. that his wife lost her smartphone last week, but he can't buy a
new one for her at this moment as his net income has reduced to a large extent.

22
"My income has reduced greatly. I can't get her a new smartphone. I asked her to use
an old feature phone used by my father who died in 2021."

Such intense is his cost of living crisis that he has to entirely cut back on indulgence.

"Before, I used to buy beef twice a month. Now, I can't even buy beef once in two months."

His purchasing power is deteriorating so swiftly that he is concerned about how he will
manage his living expenses with his income in the days ahead.

"The prices of most of the commodities have declined in the global market, but our economic
woes remain due to our own inherent problems," said Ahsan H Mansur, executive director of
the Policy Research Institute of Bangladesh.

The Bangladesh economy has failed to absorb the shock emanating from the war.

The central bank should have withdrawn the interest rate cap of 9 percent on loans and
allowed the floating exchange rate immediately after the war started, said Mansur, a former
economist of the IMF.

"Had we taken the measures on time, the ongoing worse situation could have been tackled
largely. But we have made the situation critical. So there is no scope to blame the war
blindly."

If the central bank does not take the issues with the utmost importance, the country will have
to face more stress, said Mansur, also the chairman of Brac Bank.

"The macro economy has not turned around yet after a year of the war. Rather, its
vulnerability may deepen in the coming days," said Selim Raihan, executive director of the
South Asian Network on Economic Modeling.

There is no effective policy to restore stability in the foreign exchange market as several
exchange rates of dollar-taka are being followed, he said.

Remittances are not rising to their expected level although Bangladesh sent a record number
of workers abroad last year.

The government should take strict measures to contain hundi -- an illegal cross-border
financial transaction system -- to boost remittances.

23
"We have not taken any effective measure to stop the illicit money flow. Besides, the
country's banking sector is still facing higher amounts of default loans and scams."

The government should implement the recommendations of the IMF properly to restore
discipline in the macroeconomic zone, said Raihan, also a professor at the University of
Dhaka's economic department.

The war has already created a wide range of instability both at micro- and -macroeconomic
levels, said Anu Mohammad, a former professor of Jahangirnagar University's economics
department.

The net income of the industrial workers has decreased to 30-40 percent since the inception
of the war due to inflation, he said.

The prices of essentials may rise again in the future as there is no sign of the war ending
anytime soon, said Binayak Sen, director general of the Bangladesh Institute of Development
Studies.

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 Chapter-5

5.1 Conclusion:
In conclusion, the war between Russia and Ukraine has had various indirect impacts on
Necessities prices in Bangladesh. The conflict's effects on global energy markets, particularly
natural gas and oil, can lead to higher energy costs, potentially influencing Necessities prices
in Bangladesh. Disruptions in Ukraine's agricultural production, as a major exporter of wheat
and grains, can also contribute to increased prices for wheat-based products and impact
overall food prices in the country.

Moreover, regional stability concerns arising from the conflict and potential spillover effects
can affect Necessities prices indirectly. Instability in the region can lead to migration,
security concerns, and political uncertainties, which may have implications for trade and
supply chains, potentially impacting Necessities prices in Bangladesh.

It is important to recognize that Necessities prices are influenced by a multitude of factors,

and the war between Russia and Ukraine is just one of them. Domestic factors, import
policies, global market conditions, and other geopolitical events also play significant roles in
shaping Necessities prices.

As the situation evolves, it is crucial for Bangladesh to closely monitor global Necessities
markets, energy prices, and regional stability. This will enable the country to make informed
decisions and take appropriate measures to mitigate any potential adverse impacts on its
economy and ensure the well-being of its citizens.

Overall, while the war between Russia and Ukraine may indirectly affect Necessities prices in
Bangladesh, it is necessary to consider the broader context and multiple factors that shape
these prices to accurately assess their impact on the country's economy.

25
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