One month after Russian invasion of Ukraineheto world economy live to the rhythm conflict and its consequences, from the rise of prices of the raw Materials to the risk of side effects of sanctions on Russia.
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The conflict has triggered the prices of raw materials, starting with the Petroleum. A barrel of Brent was worth $90 in February and hit $139.13 on March 7, the highest level since the 2008 financial crisis.
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Since then it has remained very volatile. Oil prices rose above 120 dollars a barrel yesterday, which is noticeable in the rise at gas stations, forcing many countries to take measures, such as tax cuts in Sweden or price caps in Hungary.
Unlike the United States, the European Union, very limited by its dependence on Moscow, decided for the moment not to impose an embargo on Russian hydrocarbons, although it wants to become independent from Russian energy in 2027.
In the wake of energy prices, metals produced in Russia, such as nickel and aluminium, have also shot up to unprecedented levels, causing production costs to rise.
In addition, breaks in supply chains have returned, especially in the automotive industry, as was the case with the covid pandemic. Likewise, the UN warned of a “famine hurricane” due to the war.
The current conflict involves two agricultural superpowers, Russia and Ukraine, which represent 30% of world wheat exports, so the rise in grain and oil prices was immediate.
The FAO warned that if the war continues, between 8 and 13 million additional people could suffer from malnutrition worldwide.
If the war continues, an additional 8 to 13 million people could suffer from malnutrition worldwide.
At the moment no ships are leaving Ukraine and the spring planting could be 25-40% lower than usual.
Although the United States, India and Europe could substitute part of the missing wheat, the situation is more complex for sunflower oil and corn, of which Ukraine was the world’s first and fourth largest exporter, respectively.
In turn, the OECD forecasts a reduction of one point in world economic growth due to the impact of the war and the IMF plans to lower its forecast, currently 4.4% for 2022.
On March 18, the European Bank for Reconstruction and Development (EBRD), the IMF and the World Bank said they were “deeply concerned” about “slowing growth, trade disruptions” and a particularly serious impact on “the poorest and most vulnerable.
Fever in the markets and the dilemma of Western companies
The year 2022 began with business results that predicted an economic recovery after covid-19. However, the war plunged the markets into a feverish state.
In Russia, Western sanctions have crippled parts of the banking and financial system and caused the ruble to fall to 177 rubles per dollar on March 7, down from 75 per dollar in early February.
In addition, 300,000 million dollars of Russian reserves abroad were frozen.
These measures raised fears of a Russian default for the first time since 1998, which ultimately did not take place. The Moscow stock exchange was closed for almost three weeks and partially reopened on Monday.
300 billion dollars of Russian reserves abroad were frozen.
In addition, hundreds of Western companies have announced their withdrawal or at least the freezing of their activities in Russia, voluntarily or involuntarily, due to fear of sanctions, public opinion or political pressure.
Large companies such as the British oil company BP, Ikea, McDonald’s or Coca-Cola decided to freeze their activities in Russia. Others, on the other hand, decided to continue their activity, arguing that they could not abandon their employees or deprive the population of basic products.
AFP
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