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Impact on other countries by Russia Ukraine crisis

Impact on other countries by russia ukraine crisis

Sectors which will get affected globally:

Energy :

  • Many European countries are heavily dependent on Russian energy, particularly gas through several vital pipelines.
  • Even if the conflict comes to an end, there is a possibility that the harsh economic sanctions on Russia would make it very difficult for these countries to be able to import gas.
  • Meanwhile, oil prices surged on Wednesday as supply disruptions mounted following sanctions on Russian banks, while traders scrambled to seek alternative oil sources in an already tight market.
  • Brent crude futures rose by more than $8, touching a peak of $113.02 a barrel, the highest since June 2014, before easing to $111.53, up by $6.56 or 6.3 per cent by 0950 GMT.
  • US West Texas Intermediate (WTI) crude futures also jumped more than $8 a barrel, hitting the highest since August 2013 before losing some steam to trade up $6.39 or 6.2 per cent to $109.80 a barrel.

Transport:

  • With global transport already severely disrupted in the aftermath of the pandemic, the war is likely to create further problems.
  • The transport modes likely to be affected are ocean shipping and rail freight. While rail carries only a small proportion of the total freight between Asia and Europe, it has played a vital role during recent transport disruptions and is growing steadily.
  • Countries like Lithuania are expecting to see their rail traffic severely affected by sanctions against Russia.

Supply chain:

  • The world’s unexpectedly robust recovery from the pandemic recession left companies scrambling to find enough raw materials and components to produce goods to meet surging customer demand.
  • Overwhelmed factories, ports and freight yards have meant shortages, shipping delays and higher prices. Disruptions to Russian and Ukrainian industries could delay any return to normal conditions.

Edible oil:

  • Ukraine alone makes up almost half of exports of sunflower oil. If harvesting and processing is hindered in a war-torn Ukraine, or exports are blocked, importers will struggle to replace supplies.In India, with the severe threat of supply disruptions, companies are left with not many options but to consider hiking prices of daily-consumed edible oils within weeks.
  • According to leading edible oil makers in the country, over 70 per cent of India’s crude edible oil demand is met through imports. For sunflower oil, the share is even higher.

Food supplies:

  • Ukraine and Russia account for 30 per cent of the world’s exports of wheat, 19 per cent of corn and 80 per cent of sunflower oil, which is used in food processing.
  • Much of the Russian and Ukrainian bounty goes to poor, unstable countries like Yemen and Libya, reported Associated Press.
  • The threat to farms in eastern Ukraine and a cutoff of exports through Black Sea ports could reduce food supplies just when prices are at their highest levels since 2011 and some countries are suffering from food shortages.

Rising prices:

  • The Ukraine war coincides with a high-risk moment for the Federal Reserve and other central banks. They were caught off-guard by the surge in inflation over the past year — the consequence, mostly, of the economy’s unexpectedly strong recovery.
  • In January, US consumer prices rose 7.5 per cent from a year earlier, the biggest such jump since 1982.
  • In Europe, figures show inflation accelerated to a record 5.8 per cent last month compared with a year earlier for the 19 countries that use the euro currency.
  • Auto Sector:The automobile sector is expected to be hit hard by the war.
  • Rise in oil prices, continued shortage of semiconductors and chips and other rare earth metals is likely to add to the industry’s woes. Besides, Ukraine is also home to many companies which manufacture car components for automakers.
  • As per a report in The Wall Street Journal, Leoni AG, which supplies wire systems made in Ukraine to European auto companies, has shut its two factories in the country. Consequently,  Volkswagen AG had to shut one of its plants in Germany.
  • Even before Putin’s troops invaded Ukraine, the global economy was straining under a range of burdens: Surging inflation, tangled supply chains and tumbling stock prices. The Ukraine crisis both magnified each threat and complicated the potential solutions.