Russia-Ukraine war will increase the problem of common man. Actually, due to this, the prices of most things around the world are expected to increase. There is a tremendous rise in the prices of many commodities including crude oil, wheat. On the other hand, America and Western countries have imposed many types of sanctions on Russia. Will this also affect the supply of essential commodities? To find out the answers to these questions, CNBC-TV18’s Latha Venkatesh spoke to former RBI governor and renowned economist Raghuram Rajan. Here are the highlights of the conversation.
Is the price jump short term, will the prices go back to normal once the fight is over?
Inflation was already high in many countries of the world. If you add fighting to this, inflation will increase further and growth will decrease. Together, both will affect inflation. This is the situation in America and Europe. The pressure on inflation will increase due to the fight. There is a risk that the fight against inflation will drag on. This is not good news. Inflation will remain high for a long time.
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What will be the impact of sanctions on Russia if it continues for a long time?
I believe the sanctions will have serious repercussions. Russia’s unexpected attack on Ukraine has united Western countries. Japan has also come with them. This has hurt the existing system in the world. Western countries want the ban to be strictly enforced. They don’t want any hesitation in it. Yes, it is sure to have an effect. Since Russia is a major exporter of many commodities including energy, the global economy may suffer due to sanctions. Russia also exports nickel, palladium, neon, xenon, fertilizers and grains.
What are the options facing the world right now in view of the high energy prices?
I believe this loss can be reduced by using other sources of supply. For example, talks are going on with Venezuela and Iran in the matter of oil. Efforts are being made to start supplying oil again from Iran. Second, there will be a revival of interest in Shale Energy. So in the next few months due to higher prices, other sources of supply will start being used. On the other hand, due to higher prices, demand will also decrease.
Russia’s size does not matter much in terms of global economy. But, it has a big role in the supply of essential things. The world is still heavily dependent on carbon energy. It has to be reduced. The focus may again increase on renewable energy.
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