Problems in the Shadows: Economic Impacts of the Russia-Ukraine War
Before diving deep into the economic impacts of the Russia-Ukraine War, it is important to acknowledge that the initial military conflict between the two nations dates back to 2014 when Russia seized the Ukrainian territory of Crimea. Tensions have continued to rise since, and in February 2022, Vladimir Putin decided to invade Ukraine in an attempt to overtake the whole region. With more than 50,000 Russian casualties and over 14,000 Ukrainian casualties — with many incidents not reported —, the war has had an immense physical toll on the two nations. Beyond Russia and Ukraine directly, there seems to be a harsher impact that is perhaps not so obviously stated. Which is the fact that the economic state of the world is depleting at an impeccably quick rate.
RUSSIAN AND UKRAINIAN ECONOMY
The front-line competitors, Russia and Ukraine have faced disaster on every corner. Their cities have been burned to the ground and both their social and political state is in shambles. But that is just the beginning.
The Russian economy is taking a turn for the worst. According to research by Tony Tsao at The Cornell SC Johnson School of Business, “businesses have been fleeing the economy, whether due to economic risk or to take a stance against the invasion”. Especially with the emphasis on choosing “the right side” in this war, the distaste for involvement with Russia has clearly cut off Russia from the outside world. This highlights how political this war has become, to the point that it infiltrates business opportunities.
On the contrary, Tsao notes that the Russian currency (Ruble) is stable and not doing as poorly as expected. A reason for this is that despite the desire to cut Russia off, many European and Western countries still require Russian oil, as Russia is one of the world’s top efficient oil producers. The rising oil prices, and continued demand for it, have given Russia a huge boost economically and made them very advantaged compared to their competitors. Hence, the Ruble remains surprisingly successful.
Ukraine, on the other hand, is doing quite poorly. As mentioned in Ukraine World, a virtual project that covers updates on Ukraine, the economic state is not at its best but is predicted to recover shortly after the war ends. In response to the war, Ukraine has started printing excess money, which has led to high inflation in the nation. Continuously, a significant long-term problem is the fact that many Ukrainians have immigrated out of the country, and especially if the war continues, it is unlikely that they will return. The expected population loss means that there will be fewer working people to stimulate the local economy, and thus a significant recession.
Overall, the Slavic countries of this war have economies that seem quite balanced. There are signs of depletion in certain sectors of the economy, such as employment and trade. But there are many different aspects of the economy that are thriving or might return to good standing post-war.
AMERICAN ECONOMY
The American government has become significantly involved in the Russian-Ukraine war, and thus, it has also affected the U.S. economy. The U.S. Bureau of Political-Military Affairs states that the U.S. intervened due to its alliance with Ukraine and the urgent need to protect it from Russia’s “premeditated, unprovoked, and unjustified war against Ukraine”.
According to an article written by Forbes relating to the matter, the US retains many companies that depend greatly on resources that are mainly provided by countries in Eastern Europe. Thus, since the European economy is declining due to war efforts, it also affects the American economy. To illustrate, stock prices have started decreasing at a critical rate. Specifically, multinational companies such as Phillip Morris, Pepsi, and Mcdonald's have reported lower stock prices, with many other stocks reflecting the same issues.
Furthermore, energy costs are rising greatly as the U.S. generally supplies its oil from Russia, but Russia has been cut off from trade with the U.S. Additionally, there has been a significant increase in inflation, which depends on interest rate trends enacted by the Federal Reserve. To specify, the interest rate has risen from “0% to 0.25%” due to this war, in order to stop inflation. Forbes mentions that if the Federal Reserve keeps restricting its policies it may lead to a great recession. Thus, it is clear that the American financial state is not at its peak.
WORLD ECONOMY
Though every country battles its own strife and challenges, the Russia-Ukraine war in particular has spread its impacts across a global scale. As found in commentary from Rishihood University, the main problem that has sprouted from this conflict is the lack of trading resources from Ukraine and Russia. Due to trade embargos, many shipments are having trouble getting through international borders. This poses a dilemma for the rest of the world because many countries depend on their exports. For example,“both Russia and Ukraine account for the global export of 29% wheat and 75% of the global export of sunflower oil”.
It doesn’t stop there. The global rate for inflation is expected to rise by 6%, and the economic sanctions placed on Russia by NATO countries have made it virtually impossible to retrieve gas and other forms of energy. This is exceptionally problematic for the European countries that are dependent on Russian exports to fuel their countries.
CONCLUSION
In the end, it’s clear that the war has posed many issues regarding the economies of the entire world. As the outside world is very familiar with trade between Russia and Ukraine, the economic sanctions have caused a variety of complications today, and many that may unfold over time. A common trend among the economies mentioned was the prevalence of inflation in the present day and specifically concerning the aftermath of this war.
Unfortunately, the media has twisted the stories to the extent that the general public is not aware of the financial standing of the countries mentioned and of the world overall. Regardless, they are all still problems, albeit in the shadows.
Works Cited
- https://www.britannica.com/topic/Ukraine-crisis
- https://www.csis.org/analysis/russias-war-ukraine-identity-history-and-conflict
- https://www.ukrinform.net/rubric-ato/3567570-russian-military-death-toll-in-ukraine-war-rises-to-51900.html
- https://news.un.org/en/story/2022/09/1126391
- https://business.cornell.edu/hub/2022/06/08/implications-russia-ukraine-war-russian-economy/
- https://ukraineworld.org/articles/stories/war-ukraine-economy
- https://www.forbes.com/sites/mikepatton/2022/03/21/how-russias-invasion-of-ukraine-could-affect-europe-and-us-economy/
- https://rishihood.edu.in/impact-of-russia-ukraine-war-on-global-economy/
- https://www.state.gov/u-s-security-cooperation-with-ukraine/#:~:text=The%20United%20States%2C%20our%20 allies,seizure%20of%20Crimea%20in%202014.
