Russia-Ukraine War: Explaining Global Impact in the World

The threat of a war between Russia and Ukraine is already having an impact on global markets. The Russian stock market has dropped 14% in the last week. However, the impact of more sanctions or a full-fledged conflict will not be felt equally around the world. Despite being more larger and more numerous, Russia's GDP is half the size of Italy's.

Parantap Basu, Professor of Macroeconomics Expert

"My view of the world economic position is that Russia is not that crucial for the global economy except for oil and gas," Parantap Basu, Professor of Macroeconomics at Durham University Business School, told i. "But oil and gas are fairly essential, so we can't ignore that." "Things are already awful, and the conflict and sanctions will make things far worse."

RPI inflation in the UK is already above 7%

Russia-Ukraine WarHigher gas and oil prices in the UK and across Europe will almost certainly lead to additional increases in inflation, which is already well above acceptable levels. The fact that rising inflation is caused by supply-side factors that are largely outside the UK's control makes it all the more difficult to control. "RPI inflation in the UK is already above 7%, and it will at least add another one or two percent if things continue as they are, and this inflation is largely supply-driven at the present," Professor Basu said.

Fall in stock market

Global markets typically weaken as wars approach, strengthen long before wars end, and treat human tragedy with utter indifference. In any case, this has been a common historical pattern. And it appears to be playing out with Russia's recent action against Ukraine, with some crucial caveats. Russia's President Vladimir V. Putin has already caused global stock, bond, and commodity markets to tremble. The S&p 500 fell 1% on Tuesday, entering what Wall Street refers to as a correction, which is defined as a drop of at least 10% from the most recent high.

Crude Oil

The Netherlands and Germany are two of the world's largest importers of Russian crude oil, whose global price had been climbing even before tensions between Ukraine and Russia erupted. If Russia restricts supply as a result of sanctions or war, it will put even more strain on European countries currently grappling with high oil costs.

Gas

Europe's dependence on Russian gas is even more pronounced than its dependence on Russian oil. "Europe gets approximately 40% of its natural gas from Russia and 25% of its oil from Russia, so you can see how important this is," Professor Basu said. Prices for gasoline and gas are already skyrocketing. As a result, gas prices will be influenced, and Europe, particularly England, will be significantly affected." In the current context, Germany has already said that Nord Stream 2, a new gas pipeline that runs directly from Russia to Germany beneath the Baltic Sea, will not be built. This will only worsen Europe's short-term difficulty to find affordable energy. Italy, Japan, and Slovakia rely heavily on Russian natural gas supplies and would be particularly vulnerable to sanctions.

Wheat

Russia and Ukraine are two of the world's top wheat exporters, with some countries relying significantly more on Russian supplies than others. Egypt and Turkey are two of the countries most reliant on the Russian wheat supply. Some of the countries that rely on Russian goods are already experiencing economic difficulties, which war will only intensify. "At least 40% of Ukraine's wheat and grain exports go to the Middle East or Africa," Professor Basu stated. Some of these Middle Eastern countries are already experiencing difficulties. "Similarly, Turkey imports a significant amount of wheat from Russia and is already experiencing financial difficulties due to excessive inflation."

ECONOMIC IMPACTS OF THE CONFLICT

It is not easy to quantify the economic impacts of the sanctions separately. We, thus, consider the ‘effects of the conflict’ in more general terms. According to the EU, ‘sanctions are one of the EU’s tools to promote the objectives of the Common Foreign and Security Policy ... EU sanctions are not punitive’. Beyond purely economic effects, the effectiveness of Western sanctions in terms of the targeted change in Russia’s policies towards Ukraine – including a stop of intervention in eastern Ukraine and the return of Crimea – the results have so far been rather disappointing (and a revision of the annexation of Crimea is completely unrealistic)

The sanctions have undoubtedly increased the negative economic developments in Russia resulting from the combined effect of the deteriorating investment climate, rouble depreciation, capital flight, and reform setbacks – the country was ‘stuck in transition and stagnation’ already before the Ukraine crisis THE EUROPEAN UNION The economies of individual EU countries are affected to very differing degrees by the conflict, depending on their trade (and otherwise) exposure to the Russian (and Ukrainian) market.

Attitude towards Russia given their historical experience

the comparatively heterogeneous view of the individual EU countries concerning sanctions and other EU policies towards Russia, Ukraine, and the Eastern Neighbourhood. In general, the Baltic States (as well as Finland) and other NMS are affected more than others (see Figures 1-6 above). At the same time, the Baltic States (and Poland)19 have adopted a much ‘tougher’ attitude towards Russia given their historical experience, whereas Hungary, Bulgaria, Slovakia, the Czech Republic (as well as Austria, Greece, and Cyprus) favor a ‘softer’ approach.

Roll of America in Ukraine and Russia conflict

President Joe Biden addressed the American people, emphasizing that the United States will not send soldiers to help Ukraine. However, he promised to protect "every inch" of NATO territory, with thousands more troops already sent to Europe, as well as to provide lethal defense weapons, economic help, and the severe US and ally sanctions on Russia to the Ukrainian people and government. He believes that such a high level of US involvement is vital because "this is about more than Russia and Ukraine."

"It's about standing up for what we believe in" says US president"

He believes that such a high level of US involvement is vital because "this is about more than Russia and Ukraine." "It's about standing up for what we believe in, for the world we want to live in, for liberty, and for the right of innumerable countries to determine their fate. And the notion that a country cannot modify its neighbor's boundaries by force, or the right of people to select their futures "Biden stated the following. "If we don't stand up for freedom when it's threatened today, we'll pay a much higher price tomorrow."

Another crucial aspect of the United States' role in the issue is its support for Ukraine as a democracy, according to Pauly. According to him, the US has provided "significant" foreign aid to Ukraine since its independence in 1991, particularly in the 1990s, to help it emerge from the Soviet era, democratize, and create a free-market economy.

"Ukraine is a democracy; it is one of the few truly functioning democracies in the former Soviet region," Pauly remarked. "Although democratization in Ukraine has been difficult, it is difficult to argue that it is not a democracy."

He went on to say, "Democracy in Ukraine is worth maintaining." "Democracy is the best deterrent to war and the best guarantor of peace."

What will be the affect of Ukraine Russia conflict on India

Crude oil prices will have an impact on the economy

The war between Russia and Ukraine is having an effect on crude oil prices. Russia accounts for almost a third of Europe's natural gas production. Russia produces around ten percent of the world's oil.

Nuclear energy research will be hampered

The trade between the two nations was $2.69 billion in 2020, according to data from the Ukraine Embassy in India's website. Ukraine exported $1.97 billion to India in this period. India exported $ 721.54 million to Ukraine at the same time. In the case of war, India's trade with Ukraine will be jeopardised.

The Indian stock market is in a frenzy

The impact of Russia's armed conflict with Ukraine can be seen on the Indian stock market. Since this morning, Asian markets have been in free slide. The BSE Sensex began with a drop of 1814 points on Thursday. In early trading, it fell to 55,375 points.

Country which has blocked trade with Russia and imposed restrictions

America: VEB and Russian Military Bank, two Russian financial entities, have been sanctioned by Vice President Joe Biden. Parts of the Russian economy are being disconnected from the international banking system, according to Biden. Along with this, the United States is slapping penalties on Russia's wealthy individuals and their families.

At the same time, the United States is supplying Ukraine with weaponry. Dmitro Kuleba, Ukraine's foreign minister, stated on Tuesday that the US had offered Ukraine more weaponry. The US, on the other hand, has stated that it will not send troops to Ukraine to fight Russia.

EUROPEAN UNION: Russia's access to Russian banks and EU financial markets has been blocked by the EU. In addition, the EU is ready to target Russian parliamentarians who support Russia's position in Ukraine. Russia can potentially be taken out of the global banking system by the EU.

France: France has said that Russian President Vladimir Putin has broken his pledge to French President Emmanuel Macron, adding that France would now implement harsh sanctions against Russia. France has also praised the European Union's sanctions against Russia. Macron has often stated that if Russia attacks Ukraine, it would pay a high price.

Germany - The Nord Stream 2 gas pipeline between Russia and Germany has been shut down. Through this initiative, Russia planned to provide gas to Germany. Germany has stated that this decision was made in response to Russia's recent actions. Since the outset, Germany has been on Ukraine's side.