Russia invades Ukraine: the 3 main dangers for the world economy of the operation ordered by Putin - Start Up Gazzete
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Russia invades Ukraine: the 3 main dangers for the world economy of the operation ordered by Putin


As Russian troops continue to attack Ukraine, the economic impact of the conflict is having a major impact on at least three key sectors for the global economy: energy, financial markets and agricultural products.

The current scenario presents new challenges for a global recovery affected by a strong wave of inflation as a result of the coronavirus pandemic.

” This is a triple blow to the global economy , with a toxic combination of higher inflation, lower economic growth and greater uncertainty,” Ben Laidler, global markets strategist at the firm eToro, told BBC Mundo.

These are the greatest dangers of the crisis in Ukraine for the world economy.

1. Energy: increase in the price of gas and oil

The conflict in Ukraine pushed the price of oil to its highest level in more than seven years hours after the invasion began on Thursday and gas futures prices soared 60% in just one day.

Russia is the second largest exporter of oil and the largest exporter of natural gas in the world.

Gas compression station in the south of Russia.
Russia is an exporting power of energy products.

There are fears that President Vladimir Putin could use natural resources as a weapon of war by cutting gas supplies to Europe in response to economic sanctions imposed on him by the West.

The problem is that if a country dependent on Russian supplies receives less gas, it has to replace it using other sources available on the international market, which would affect gas supplies for other countries.

“The bigger the conflict, the bigger the impact on global energy supply,” said Bill Adams, chief economist at consultancy and investment bank Comerica.

2. Market and currency instability

Shortly after the start of the Russian attack, financial markets in Europe and, in particular, in Russia crashed.

“The invasion is a worse scenario than some investors anticipated,” said Keith Lerner, chief market strategist at Trust Advisory Services. “That’s why we’re seeing a negative reaction.”

Stock trader on Wall Street
Financial markets in Europe were hit by the uncertainty caused by the invasion.

Shares of Russian companies fell sharply after news of the Russian invasion of Ukraine broke, with banks and oil companies among the worst affected.

As the conflict unfolds, markets are likely to experience increased volatility, experts say.

This would not only affect large investors, but also people who, for example, save for a pension, whether private or public, whose savings are invested in the stock market.

On the other hand, the price of gold, a haven asset for investors, reached its highest level since September 2020 on Thursday.

In parallel , the dollar has strengthened , while other strong currencies such as the euro and the pound sterling have fallen.

In Latin America there was a depreciation of local currencies against the dollar, with the Chilean peso leading the losses this Thursday.

3. Agricultural products: the price of wheat and corn skyrockets

Prices in the wheat and corn markets rose as soon as the Russian attack on Ukraine began.

The price of wheat reached its highest point since 2012 , raising concerns that it will further increase the cost of food globally.

Russia and Ukraine, once called “the breadbasket of Europe”, export more than a quarter of global wheat production, a fifth of corn and 80% of sunflower oil.

Wheat harvest in Ukraine
Ukraine and Russia account for more than a quarter of world wheat trade and a fifth of corn sales.

Adding to the conflict is the drought in South America, which has cast a shadow over the outlook for soybean supplies.

Experts have warned that the war could affect grain production and even double world wheat prices. On the other hand, Russia is also one of the world’s largest fertilizer exporters. Their cost had already risen due to shortages last year, and farmers may have to pay more for them.

Looking ahead: the danger of escalating inflation

Due to the economic effects of the pandemic, the cost of living around the world had already increased markedly.

In the United States, inflation reached 7.5% in January, its highest level since February 1982. It is worth bearing in mind that the two engines that made this indicator rise the most were, precisely, the price of food and energy.


“If supplies of energy, food or other commodities, such as metals, are affected by the conflict, prices could rise further ,” warned Lora Jones, a BBC business reporter.

A team of experts from the Center for Business and Economic Research (CEBR) projected that inflation in major Western economies could reach close to 10%.


Analysis by Faisal Islam, BBC Economics Editor.

“Russia will not be punished for its invasion with an embargo on energy exports, as Saddam Hussein was after Iraq invaded Kuwait in 1990.

In fact, by some measures, Russian gas exports to Europe have increased. Euro flows from Western Europe to the Kremlin will continue, even as those countries expose what President Putin is doing with that money.

Russia is clearly taking a beating in the markets. Its sovereign debt is in trouble, its stock market is crashing, and its currency is at record lows.


As in any war, the economic battle can escalate. Western nations could remove the Russian financial system from the Swift banking communications network, plunging Russia into further isolation.

But President Putin may also limit the supply of energy to the West, raising prices to stratospheric levels and closing factories in Europe.

Although that would have long-term consequences for his entire economic strategy.

This conflict could last a long time and plunge most of Europe into a significant recession. The consequences for diplomacy, politics and life are quite worrying. But the economic impact is very serious.

Timeline – How did we get to this point?

Satellite images suggest that Russia is sending troops towards its border with Ukraine. Moscow denies preparing an invasion and accuses NATO of increasing its activity in the region.

This concentration of Russian troops was seen about 300 km from the Ukraine.  Credit: Maxar
CaptionThis concentration of Russian troops was seen about 300 km from the Ukraine. 

Russia says the crisis can only be resolved if the West agrees to a list of demands, including a guarantee that Ukraine will never join NATO.

Russian troops begin to arrive in Belarus for joint military exercises. Belarusian President Alexander Lukashenko downplays its importance. He says they are “regular exercises.”

Russian troops unload tanks from a train after arriving in Belarus.  Credit: Getty Images
CaptionRussian troops unload tanks from a train after arriving in Belarus. 

NATO says its forces are ready and more warships and warplanes are being sent to the region. NATO Secretary General Jens Stoltenberg says NATO “will continue to take all necessary steps to protect and defend all allies.”

The United States responds to Russia’s demands. He refuses to rule out Ukraine joining NATO in the future. In response, President Putin accuses the West of ignoring Russia’s concerns.

Russia says some of its troops are withdrawing from areas near the Ukrainian border, but NATO says there is no evidence of a withdrawal.

President Putin recognizes the independence of two Russian-backed breakaway regions in eastern Ukraine. He says that he will send troops to back them up.

Putin announces that a “special military operation” by Russian troops is underway in Ukraine. Kiev says it is a “full-scale invasion.”



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Joshua Smith

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