The Invasion of Ukraine Effect on Geopolitics and Global Economics
The rise of the global Ukrainian conflict shows a turning point in the geopolitical and economic future of the world. Covid 19 has already heavily impacted the global economy and it has only further been impacted by the invasion of Ukraine. Different nations have been forced to choose sides in this war causing them to sever diplomatic and product ties. This draws new lines on trade networks further changing the future of how products will reach us and the prices we will have to pay for them.
Firstly the Invasion itself has made Ukraine's imports and exports ever rarer to receive out of the country. As Russia has full intention to reach full control of the black sea. A necessary trade network for getting Ukraine Exports out of their ports. Forcing farmers and other suppliers to stockpile their products and risking them spoiling and becoming unusable. “Russia’s navy now effectively controls all traffic in the northern third of the Black Sea, making it unsafe for commercial shipping,”.
“The war in the Ukraine has led to a surge in global food prices (Arezki 2022) that threatens to push millions into poverty. This column presents estimates of the impact that the conflict-induced surge in wheat and corn prices is likely to have on low and lower middle-income countries”. Another major impact of this was the mass shortage of baby powder formulas due to Ukraine being one of the world's top exporters of sunflower oil a common ingredient needed to make baby powder. “Together, Ukraine and Russia export around 75% of the world's sunflower oil…In the US, the formula shortage has led to a rise in hospitalizations, including in Atlanta and South Carolina, where health centers recently reported admitting infants for nutritional deficiencies connected to the scarcity”. Ukraine is responsible for a wide range of exports and the black sea blockade of commercial trade and the general impact on the local economy due to the war has caused disruptions to the entire world.
Due to this blockading, the Ukrainian Economy is also in free fall as it is struggling to keep itself afloat as it cannot financially support this war effort due to exports not being able to leave ports and having to rely on foreign support. “Despite the resilience, the economic situation of Ukraine is, of course, fairly dire. The IMF estimated in April 2022 that the economy of Ukraine could contract by 35 % in 2022.82 The World Bank estimated in April 2022 that the drop would be 45 %.83 In November, the Consensus Forecast for 2022 GDP change was a shrinking of 35 %, whereas the expected recovery in 2023 was only 5.3 %. The National Bank of Ukraine estimated in October 2022 that the GDP drop would be 32% in 2022”. This only further complicates the recovery process as the current damage estimates are skyrocketing as Russia is destroying public infrastructure and property “The World Bank estimated in August 2022 that the total reconstruction and recovery needs of Ukraine had reached USD 349 billion”. As this estimate was made one year ago the total damage estimate cost will far exceed that current value. Despite all the damages and costs that nations around the world are grappling with Ukraine is the one that has been the most severely affected with most of its public infrastructure destroyed and its economy will struggle to properly recover from the fallout.
Another domino effect of this is the European energy crisis, before the war was initiated a large percentage of Europe's oil imports came from Russia, and due to most of Europe being allied with the United States forced them to cut ties and look for different ways to sustain their energy needs. This drastic shift in energy dependencies has come up short in many sectors forcing their countries to increase commodity and oil prices. “Overall, the Russian invasion of Ukraine could lower GDP growth by up to 1.5 percentage points over 2022 and 2023”. This will further destabilize the already fragile economy that was gaining its footing after Covid-19.
“While real GDP had returned to levels reached before the pandemic by the end of 2021, it was still well below the pre-crisis trend in the European Union overall and in most EU members individually. The war slowed down the economic recovery and created new sources of vulnerability”.
Russia is also currently fighting back against sanctions that are clamping down on its own economy by slowly shutting down exports of its oil to countries that are allied with NATO (North Atlantic Treaty Organization). The decrease of oil in an already tight energy usage position made countries force their oil prices up with some places seeing their record highs in several years. This will have a lasting impact on the natural gas industry and energy sectors for a while until it is properly recovered from changing dependencies.
 Harris, Shane. "U.S. Intelligence Document Shows Russian Naval Blockade of Ukraine." The Washington Post 2022. Print.
 Erhan Artuc, Guillermo Falcone, Guido Porto, Bob Rijkers. "War-Induced Food Price Inflation Imperils the Poor." VoxEU (2023). Print.
 Towey, Hannah. "Russia's Blockade of Ukraine Ports Is Further Complicating Dire Baby Formula Shortages in the Us by Preventing Exports of Key Ingredient." Insider 2022. Print.
 European Investment Bank. How Bad Is the Ukraine War for the European Recovery? EIB, 2022.
 Heinonen, Lauri, and Iikka Korhonen. "The Effects of the War on the Ukraine Economy: The Situation at the End of 2022 1." BOFIT Policy Brief, vol. 2023, no. 1, 2023, pp. 4-64. ProQuest, http://login.ezproxy.lib.vt.edu/login?url=https://www.proquest.com/scholarly-journals/effects-war-on-ukraine-economy-situation-at-end/docview/2770737181/se-2.