Russia Ukraine War: Due to the ongoing war in Ukraine, there is already a risk of interruption in the supply chain. Ukraine and Russia account for only a small proportion of the imports from major manufacturing countries such as Germany and the US, but they provide raw materials and energy for many important supply chains. ) is an important supplier.
The economic consequences of the war, however, put the lives and livelihoods of many Ukrainians at risk. Also war always creates a humanitarian crisis as well. Here are five such sectors on which this war is likely to have a great impact going forward-
Many European countries are heavily dependent on Russian energy, especially the gas being delivered to them through several important pipelines. This fight has really heightened their concerns.
Russian gas dependence has been suggested, as Europe is not looking to remove Russia from the international payment system SWIFT.
While there is currently no possibility of stopping Russian gas flows completely, even the smallest blockage will have a major impact. On the other hand, global gas reserves are low due to the pandemic and energy prices are already rising rapidly, affecting consumers and industry.
With gas an essential input to many supply chains, such basic supply disruptions will have macroeconomic consequences. When gas prices first rose in the autumn of 2021, for example, fertilizer plants in the UK were shut down because high energy costs made production unsustainable.
This led to a loss of carbon dioxide, which is essential for everything from medical procedures to keeping food fresh. Such consequences are likely to increase with rising oil and gas prices.
Global food prices have already risen sharply during 2021 due to everything from higher energy prices to climate change. Food producers are likely to be under further pressure as the prices of key inputs are now rising.
If harvesting and processing in war-torn Ukraine is disrupted, or exports are disrupted, importers will struggle to replace supplies. Some countries particularly depend on grain from Russia and Ukraine.
For example, Turkey and Egypt depend on them for about 70% of their wheat imports. Ukraine is also a top supplier of corn to China.
Increasing production in other parts of the world could help reduce the impact of food supply disruptions. However, Russia is also a major supplier of major ingredients for fertilisers, so trade restrictions could affect production elsewhere.
Meanwhile, we can also expect a change in business flows. For example, China has already said that it will start importing Russian wheat.
3- Transport
Global transport has already been severely disrupted after the pandemic, but this war could create more problems. The transport modes likely to be affected include Ocean Shipping and Rail Freight.
Since 2011, regular rail freight links have been established between China and Europe. Recently the 50,000th train has completed the journey.
While rail is only a small part of the total freight traffic between Asia and Europe, it has played an important role during recent transport modes and continues to grow. Trains are now being diverted away from Ukraine, and rail freight experts are currently optimistic that disruptions will be kept to a minimum.
However, countries such as Lithuania are expecting their rail traffic to be severely affected by sanctions against Russia. Even before the invasion, shipowners avoided the Black Sea shipping route, and insurance providers demanded notification of any such voyage.
If it is cut off by the Russian military, the impact on Ukrainian imports and exports could be substantial, with potentially dire humanitarian consequences.
Rising oil prices due to the war are generally a concern for shipping. Freight is already very high and may increase further. There is also a concern that cyber attacks could target global supply chains.
Since business is heavily dependent on online information exchanges, it can have far-reaching consequences if major shipping lines or infrastructure are targeted.
Russia and Ukraine are leading global producers of metals such as nickel, copper and iron. They are also extensively involved in the export and manufacture of other essential raw materials such as Neon, Palladium and Platinum.
Fears of sanctions on Russia have pushed up the price of these metals. For example, with palladium, the current trading price is around US$2,700 an ounce, up more than 80 percent since mid-December.
Palladium is used for everything from automotive exhaust systems and mobile phones to dental fillings. Prices of nickel and copper, which are used in manufacturing and building, respectively.
5- Microchips
The lack of microchips was a major problem throughout 2021. Some analysts were predicting that the problem would subside in 2022, but recent developments may dampen such expectations.
Under sanctions on Russia, the US has been threatening to cut Russia’s supply of microchips. But that sounds hollow when Russia and Ukraine are major exporters of neon, palladium and platinum, all of which are critical to microchip production.
About 90% of the neon, used for chip lithography, originates from Russia, and 60% of it is purified by a company in Odessa.
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