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The economic impact of war in Ukraine

  • March 7, 2022
  • 2 min read
The economic impact of war in Ukraine

The road ahead for Ukraine will be a long and difficult one. The war has been devastating for the people, thousands of whom have been displaced as a result and many have lost their lives. 

For a world struggling to bounce back from a global pandemic, a war involving, Russia, one of the world’s biggest economies could have several consequences beyond even the countries involved. Oil prices rose above $100 a barrel while Europe’s natural gas prices initially climbed by nearly 70%.

Europe is especially vulnerable because it has done little to reduce its dependence on gas from Russia. Germany having abandoned nuclear power has only exacerbated the issue.

As Ukraine fights for its survival and independence, governments are working to sanction Russia for the invasion, fully aware of the impact it would have on their own economies. Joe Biden has warned already that a there will be a price to pay at home. The rising cost of fuel could cost the president some support among American voters. 

The pandemic has exposed the vulnerability of the world’s economy, but the aftershock of the invasion could make things even worse. The rising costs of oil and gas could hit the most vulnerable. Only 6% of the UK’s oil and 5% of its gas comes from Russia but the EU sources almost half of its gas from there. Some fear Putin ‘weaponising’ this in response to sanctions from Europe. German politicians have called for a national gas reserve in preparation. 

Ukraine and Russia have both been known as the “breadbasket of Europe,” exporting a quarter of the globe’s wheat and half of its sunflower, used for products such as seeds and oil. While 90% of wheat consumed in the UK is produced here, fertiliser is one of Russia’s biggest exports and this will impact farmers. 

And Russia is one of the largest suppliers of metals used in car manufacturing. These include nickel used in electric car batteries and palladium, used in catalytic converters.

The Ukrainian people have shown bravery and strength throughout this crisis, coming together to resist the invasion and Putin’s actions cannot go unpunished. But it’s up to our government to protect the most vulnerable here from the economic fallout.

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