By Staff Reporter As the uncalled-for war between Russia and Ukraine rages on, the world is already reeling under a serious unprecedented economic downturn – in all facets industrial production. The world, especially in the economic fronts is waiting with bated breaths for the time war-induced panics will subside. This comes hot-on-heels of Coronavirus pandemic that has devastated the world economies.
Without going into the political details that has spurred the war, the after-effects of the Russia’s invasions of Ukraine are being felt and will be felt long after the war if there is any end to it. Russia, being one of the big players in the global supply chain especially in oil and gas sectors, its involvement in the war will certainly disturb the global supply chain causing panic purchase of the commodities that Russia supplies to the world and curtailing the free-flow of goods and services enjoyed before.
The Russian invasion of Ukraine will certainly lead to higher oil (oil is already at a nine-year high and hovering around $114 a barrel by the time of writing this article) and natural gas prices worldwide, even if additional supply outside of Russia comes on line, impacting every oil-importing countries, the various economic reports note.
Never in the recent past has the price of crude oil shot beyond USD 100. The last time this this happened was in 2014 when Russia went to war with Crimea thus creating a glut in oil supply and subsequent shoot in oil prices worldwide. Other areas of the countries will certainly have one form or the other of economic reverberations and hemorrhages – for instance Egypt that relies on the Russian wheat might not have bread on their tables while Kenya that supplies coffee and tea to Russia will have little or no trade.
Russia controls 12 percent of the global crude oil production, 17 percent of natural gas, 5.2 percent of coal, 4.3 percent of copper, 6.1 percent each of aluminium and nickel, 15 percent of zinc, 9.5 percent of gold, 5.4 percent of silver, 14 percent of platinum, 44 percent of palladium and 11 percent of wheat.
International financial transactions might have long time to wait as Russia will be hoarding cash and perhaps bring in restrictive measures on how the country is going to borrow. The ruble has so far tumbled by 30 percent against the dollar. What all these points at is that the on-going war effects on the abovesaid economic dynamics will see to downturns in many economic sectors.
This coupled with lingering economic sanctions imposed by the EU, USA, Canada and NATO allies and Russia’s threat to strangle the oil and gas supplies to EU might have far-reaching ramifications. Russia supplies 40 percent gas and 20 percent oil to EU countries.
According to Maser CEO Prateek Suri, manufacturers of smart TV and other electronics, the microchip manufacturers will be hard hit by chip shortage as it is already being seen in worlds major microchip consumers. Maser is a gulf origin consumer brand company with interests in African sub Continent.
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“The import of the war in Russia and Ukraine is that the war will be bound to further worsen chip shortage. Since Russia controls as much as 44 percent of global palladium and Ukraine produces a significant 70 percent of the global supply of neon — the two key raw materials that go into making chips,” says Mr. Suri.
He further adds that besides the obvious restraints that the war is likely to cause on the world business, the global supply chains for most other commodities will wilt and crisis is likely to deepen if nothing happens soon to stop the war from escalating.
“Various reports indicate that Russia-Ukraine conflict to can hit the global supply chains that are already constrained due to the pandemic and the worst impact will be on ongoing chip shortage because the warring nations brutally control supplies of key raw materials that go into making semiconductors, warns a Moody Analytics report and the crisis is likely to deepen,” suri adds.
Palladium and neon are the two resources that are key to the production of semiconductor chips and these chips are necessary for almost all other industries like automobiles, mobile phones and consumer electronics and many others.
