Ukraine Russia

War: How It Has

Affected Global
Trade
S U B M IT T E D B Y:
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E I MA A N K H A N ( S P2 0 -B B A -0 6 9 )
H IK MAT U L L A H ( S P 2 0 - B B A - 0 6 5 )
 Russia-Ukraine War
Introduction

The Russia-Ukraine war is a conflict that has been ongoing between the two
countries since February 2014.

It escalated in 2022 with Russia’s invasion of Ukraine, thus leading to a full-fledged

war between the two nations.
 Reasons for Conflict
Some of the fundamental factors that have led to this conflict are;

1. Ukraine joining NATO:

Following the collapse of the Soviet Union, NATO expanded eastwards, with many former
communist states joining it. This has resulted in NATO moving hundreds of miles closer to
Moscow which is a threat for Russia. Recently, Ukrainian president stated that Ukraine shall join
NATO, this led to direct invasion by Russia as Russia considers Ukraine joining NATO a major
threat.
 Reasons for Conflict
2. Annexation of Crimea:

East-West relations worsened drastically in early 2014, when mass protests in Ukraine forced out
a president closely allied with Mr. Putin. Russia swiftly invaded and annexed Crimea, part of
Ukraine. Moscow also fomented a separatist rebellion that took control of part of the Donbas
region of Ukraine, in a war that still grinds on, having killed more than 13,000 people.
 Reasons for Conflict
3. Capture of Ukraine:

Putin clearly wants to draw Ukraine, a nation of 44 million people, back into Russia’s sphere of
influence. It seems that Russia’s leadership is wanting to capture and integrate Ukraine back into
Russia, as it was during the Soviet days.
 Impact on Global Trade
The war in Ukraine and the sanctions imposed on and by Russia and Belarus have had a huge
effect on international trade.

They have affected direct trade with these countries and trade further down the chain.

Effects range from a shortage of food products, raw materials and components to cancelled trade
routes, changes in demand and price increases.

Some of the major ways global trade has been affected have been explained.
 Rising Inflation
From a trade perspective, the biggest consequence of the war is the rise in commodity prices. The
considerable price increases have an effect on international supply chains and markets. The result is
higher inflation rates worldwide.

According to a survey taken between February and March 2022 i.e. after the invasion, the expected
inflation rate increased to 5.6%, a 0.9% increase from the expected rate of 4.7% that was reported
before the invasion.
 Rising Inflation
Similarly, The share of respondents expecting a “strong increase” in fuel prices over the next twelve
months is at 81% after the invasion had begun. This is about 20 percentage points higher than the share
in the pre-invasion period (CEPR).

Analysis suggests the war in Ukraine will add about 2% to global inflation in 2022 and 1% in 2023,
compared to pre-war forecast in Winter 2022 (Barron’s)
 Global Food Crisis
Russia’s war in Ukraine is making food more expensive across the globe, threatening to worsen
shortages, hunger, and political instability in developing countries. Together, Russia and Ukraine
export nearly a third of the world’s wheat and barley, more than 70 percent of its sunflower oil and are
big suppliers of corn.

World food prices were already climbing, and the war has made things worse, preventing some 20
million tonnes of Ukrainian grain from getting to the Middle East, North Africa, and parts of Asia. The
UN Food and Agriculture Organization (FAO) projects up to 181 million people in 41 countries could
face a food crisis or worse levels of hunger this year.
 Global Food Crisis
Typically, 90 percent of wheat and other grain from Ukraine’s fields are shipped to world markets by sea
but have been held up by Russian blockades of the Black Sea coast. Ukraine has only been able to
export 1.5 million to 2 million tonnes of grain a month since the war started, down from more than 6
million tonnes

Western sanctions on its banking and shipping industries also make it impossible for Russia to export
food and fertiliser and are scaring off foreign shipping companies from carrying it.

Ukraine and Russia mainly export staples to developing countries that are most vulnerable to cost hikes
and shortages.

Countries, such as Somalia, Libya, Lebanon, Egypt and Sudan, are heavily reliant on wheat, corn and
sunflower oil from the two warring nations.
 Disruptions to International
Tansport
Freight rates reached record highs during the COVID-19 pandemic. The current increasing fuel
costs are causing inflation and may result in higher freight rates.

Besides this, sanctions against Russia and safety concerns have disrupted land and air transport
routes via Ukraine and Russia.

Rerouting these connections is expensive. And there are limited options to divert shipments via
the already disrupted maritime transport sector. Also, there are fewer Black Sea trade routes.

This means that even countries that do not have trade restrictions may struggle to import from the
region.
 Considerable challenges for
exporters
Besides its effect on imports, the war has also affected exports to Ukraine and Russia. Disrupted
access to these markets is an urgent issue for perishable goods, such as fresh fruit and vegetables.

Some products that exporters cannot ship to Ukraine and Russia could be redistributed to other
(European) markets. Still, exporters may not be able to avoid oversupply. Redistribution also
causes increased competition and price reductions.

At the same time, rising energy and fertiliser prices are causing higher production costs. This
creates a considerable challenge for exporters.
 Conclusion

To conclude, the war between Russia and Ukraine has had spillover effects for different regions
of the world and has affected the global trade in different ways. Some of the ways this war has
impacted global trade have been explained.
 References
https://www.cbi.eu/news/how-war-ukraine-affecting-international-trade-and-emerging-economies

https://www.weforum.org/agenda/2022/04/ukraine-war-global-trade-risk/

https://moderndiplomacy.eu/2022/12/10/impact-of-russias-invasion-of-ukraine-on-global-energy-situat
ion/

https://www.cer.eu/insights/impact-ukraine-war-global-energy-markets

https://www2.deloitte.com/uk/en/insights/economy/russia-ukraine-war-inflation-impact.html

https://www.wto.org/english/res_e/publications_e/crisis_ukraine_e.htm
The End