New Delhi: Russia’s imposed war on Ukraine has put not only Russia but the whole world in a state of economic crisis. Because of this, the financial markets have been completely shaken. Be it migrant workers of Uzbek, European consumers, or people of Yemen living a bad life, the situation of all is worsened.
Even before Putin’s attack, the world economy was already trying to recover from the shock of the Corona epidemic. Because of this rising inflation, supply chains and falling stock prices had left the world in shambles. In such a situation, the Ukraine crisis has complicated all the situations and the solutions related to it. Clay Lowy, executive vice president of the Institute of International Finance, a trade group of global banks, says that we are in such an unknown situation where we cannot predict anything.
Since both Ukraine and Russia are not counted as economic superpowers, this loss is being underestimated. But in such a situation it is very important to understand that these two countries are playing a very important role in the export of energy, precious minerals, wheat, and other materials. However, the two countries together contribute 2 percent to the total GDP of the world. Since Russia is an important supplier of natural gas and minerals around the world, the increase in their prices is sure to cause economic losses around the world. About 40 percent of Europe’s natural gas and 25 percent of oil come from Russia. That’s why this war has put the world in rushing inflation and financial crisis.
Economic siege
In response to Putin’s aggressive attitude, Western nations have imposed severe economic sanctions on Russia, which has forced Russia’s major banks to move away from the SIFT international banking system. Along with this, severe restrictions have also been imposed on Russia on the use of its foreign exchange reserves. The effect of this ban was seen very quickly. The Russian ruble hit its record low on Monday. Long queues were seen in banks, Russians were seen stranded at ticket booths on the metro line as Amazon Pay and Apple Pay pulled their hands.
The International Finance Institute believes that the Russian economy may decline by double digits this year. Which is worse than the 7.8 percent drop in 2009. All the wars, from the Iran-Iraq war in 1980-1988 to the NATO bombing campaign on Serbia in 1999, show that this time the Russian economy may see a decline of 50 to 60 percent.
The economic condition of Europe is in danger due to the dependence of gas on Russia. Since the start of the war, the price of natural gas has increased by 20 percent. It has seen an increase of 6 times as compared to the prices of 2021. The economic condition that has worsened due to the increase in gas prices is called demand distortion. Due to which the production of fertilizer producers who use too much gas has had a profound effect. Due to this farmers have to pay more for buying machines and fertilizers.
No relief in the supply chain
After the pandemic, companies are busy trying to procure raw materials and other components, so that the demand of consumers can be met. In such a situation, delay in shipping, lack of goods means that the price will increase. In such a situation, due to the breakdown of Ukraine and Russian industries, it may take a long time for the situation to return to normal. Mark Zandy, the chief economist at Moody’s Analytics, says that Russia and Ukraine together produce 70 percent of the world’s neon. It plays an important role in the manufacture of semiconductors. This is a matter of great concern for the world because computers like all other automobile industries are already struggling with their shortage.
Eight years ago, when Russia annexed Crimea from Ukraine, the price of neon had increased by 600 times. However, chip producers have stockpiled it and are trying to find an alternative to Russia.
Similarly, Russia and Ukraine together supply 13 percent of the world’s titanium, which is used in passenger jets. Similarly, 30 percent of palladium comes here, which is used as a filling material for cars, cell phones, and teeth. Russia is a major producer of nickel. Which is used in making electric car batteries and steel.
Neighbors’ problems after the war
Central Asia will suffer from sanctions on Russia. As the age of people working in Russia continues to grow, so does Russia need young migrant laborers who come from Uzbekistan and Tajikistan. Their family depends on the money received by the laborers working here. According to the Russian Central Bank, in 2020, even when Kovid was at its peak, $3900 million was sent from Russia to Uzbekistan and 200 million rupees were sent to Kyrgyzstan. Therefore, the economic sanctions imposed on the ruble will also have an impact on the economic situation in Central Asia.
Pressure on food supply
Ukraine and Russia supply 30 percent of wheat, 19 percent of corn, and 80 percent of sunflower oil to the world. The growing threat to farms in eastern Ukraine and cutbacks in imports from the Black Sea could impact the food supply. Because of this, food crises can also arise in many countries.
