How will the Russia-Ukraine war affect the world economy?

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Since the outbreak of the war between Russia and Ukraine Ukraine on February 24, oil prices have surged to $110 a barrel and caused severe volatility in international commodity markets, making it possible for prices to rise further from their previous high levels. Given the relative importance of both sides in the world economy, the war is bound to have many adverse effects on the global economy.

First, it causes the world energy supply to be tight and the price to rise.

Russia and Ukraine are both major suppliers of global commodity trade. Russia plays an important role in the world market, while Ukraine is an important exporter of grains and non-ferrous metals. It is the largest wheat producing area in Europe, and has the reputation of “the granary of Europe”.

Russia is the LARGEST energy supplier to the EU, accounting for about 40 percent of the BLOC’s natural gas imports and nearly one-third of its crude oil imports, accounting for 29 percent of Europe’s total oil imports in 202. Moreover, Russia is one of the world’s major oil producers, accounting for 11% of global oil production and 35% of exports.

Russia’s oil exports totaled $72.6 billion, second only to Saudi Arabia’s, while the U.S. was fourth at $50.3 billion.


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Russia is a key signatory to the OPEC+ Production program, accounting for about 25 percent of total OPEC+ production in January-February 2022.
Due to the outbreak of the war between Russia and Ukraine, the price of crude oil has exceeded $110 per barrel, the price of natural gas has increased by 45% and the price of more than 50 chemicals has increased.
Second, the impact on global food supply, resulting in higher food prices
Russia is the world’s largest wheat exporter, accounting for 10 percent of global production and 20 percent of international exports. Ukraine is the world’s fifth-largest wheat exporter, accounting for 10 per cent. Their combined exports account for 30 per cent of the world’s wheat supply. Russia is also the world’s largest exporter of nitrogen fertilizer, the second largest exporter of potash and the third largest exporter of phosphate fertilizers, all of which are related to agricultural production.
In addition, Ukraine accounts for more than 10 percent of global corn exports and controls significant production and export of sunflower oil and barley.
The Middle East is the world’s largest importer of wheat because of its heavy reliance on imported food due to water shortages. Egypt has long been the world’s largest wheat importer, importing 50 percent of its wheat each year, while 80 percent of its imported wheat comes from Russia and Ukraine, Egypt’s largest and second largest sources of wheat imports, and Egypt is expected to import more than 13 million tons of wheat this year.
In the Middle East, in addition to Egypt, Lebanon and Libya are also highly dependent on wheat exports from Russia and Ukraine. Even the World Food Programme buys wheat from Ukraine to provide food aid to Yemen and Syria. Rising food prices caused by the war could further destabilize the Middle East, which has long been in turmoil.
There has always been a saying in the international community that once Russia conflicts with the West, the consequences will be “the lack of gas in Europe and the lack of food in the Middle East”, which is enough to show Russia’s important position in international geopolitics.
Third, global supply of non-ferrous metals will be affected
Russia has the world’s largest producer of high-grade nickel, Nornickel, and production has been stable in recent years at around 210,000 tons. Russian nickel production is mainly domestic, with some nickel production in Finland and South Africa, of which Russia accounts for 80%.
In 2021, China imported 46,093 tons of refined nickel from Russia, accounting for 17.53 percent of the total imports, while the proportion was 39.31 percent in 2020 and 45.48 percent in 2019.
Russia has produced 1m tonnes of refined copper in recent years, accounting for about 4% of global copper supply, with domestic demand of more than 300,000 tonnes and net exports of 600,000-700,000 tonnes. At present, the global copper supply tends to be tight and is in a very low inventory situation. Once the volatility caused by emergencies, the price will definitely rise sharply.
Russia is the second largest producer of primary aluminum after China, producing 3.764 million tons in 2021, accounting for 5 percent of global production, 93 percent of which is located in Siberia. Sales market is mainly Europe accounted for 41%, Russia and cis countries accounted for 27%, China’s 2021 electrolytic aluminum imports of 1.58 million tons, including 18.4% from Russia.Ukraine is the world’s leading exporter of iron ore pellets, exporting 36.71 million tons in january-November 2021, second only to Brazil and Sweden, with a year-on-year increase of 78.7 percent due to rising iron ore prices.
Fourth, it will have little impact on global economic recovery

Most economists now predict that any price rises caused by the war with Ukraine will be short-lived, will not boost long-term inflation and will therefore have little impact on the ongoing global economic recovery.

For us, the direct impact on our earphone factory is the increase price of battery raw materials, because battery contains nickel and lithium metal elements,and we need battery in our neckband Bluetooth production. But our earphone factory are trying our best to ensure the production and keep the same price. Hope the war will end soon, and dawn will return to earth as soon as possible.

earphone factory, neckband Bluetooth: https://www.pghhearphones.com/
Editor:
Sophia Huang
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Post time: Mar-07-2022