How Russia’s war in Ukraine is wreaking havoc on the economic supply chain

There is something that Russia has that the world needs, and Putin knows it. If he carries out his plan, it could cause a “global crisis”.

Beer. Bread. Microchip. sofas. These are the first telltale signs of the looming economic carnage triggered by Russian President Vladimir Putin’s war in Ukraine.

Things were not good at first.

Since the Covid-19 pandemic began two years ago, global supply networks have been severely disrupted. Factories have been closed. Ships have been stuck in long queues to unload their cargoes. Primary resource supplies have slowed.

Now, just as the world economy was beginning its recovery, Putin has thrown a monkey wrench into the works.

The crippling crisis in semiconductor supply is getting worse. That means it will take even longer for everything from new cars to game consoles to hit stores.

Home goods such as sofas, flat-pack furniture and appliances are stuck in shipping queues if the factories that make them remain open.

Supplies of minerals such as aluminum are strained. That means brewers struggle to secure enough to package their beer. And the global grain shortage means the wheat needed to make that beer is also more expensive.

Such price shocks They are for the lucky ones.

Some nations face a imminent hunger emergency. Global food production and distribution networks are struggling under the pressures of extreme weather, pandemic shutdowns and military lockdowns.

It’s a “perfect storm” of converging crises, says Ertharin Cousin, an analyst at the Chicago Council on Global Affairs. “That could result in a cataclysmic increase in food prices.”

“Restricted harvests and scarcer fertilizers promise hunger and hardship for tens of millions”, Foreign Policy international affairs analysts warn.

The Hunger Games

Two months of war have paralyzed Russian and Ukrainian exports.

Corn. Sunflower oil. Both are major global suppliers of these staple foods.

On top of that, they produce about 30 percent of all exported wheat.

The pandemic supply chain turmoil has seen global grain prices rise steadily for more than a year. But it jumped by more than 25 percent when Russian tanks broke into the Ukrainian border crosses

Some 1.25 million tons of grain are stuck in the holds of ships blocked in Ukrainian ports. Since February, more than 57 bulk carriers and 1,000 crew members have been trapped.

That grain is likely to start spoiling in late May.

“They certainly did not plan to keep this grain on the ships for a long time,” Ukraine’s Agriculture Minister Mykola Solskyi told local media.

Now Ukraine’s railway network has also been attacked. This means that moving this vital food resource to its markets across Europe is no longer an option. And that even if Ukraine were to lift its export bans: it needs the food for itself.

But 26 countries are heavily dependent on wheat exports from Russia and Ukraine. And alternative sources are not readily available.

Such shortages could result in “major socioeconomic earthquakes in the Greater Middle East and parts of Africa.” warns Jamestown Foundation political analyst Dr. Sergey Sukhankin.

Now Putin has imposed his own embargo on the world, ordering its fertilizer plants to limit exports. His nation is the world’s leading producer.

The international think tank Environmental Defense Fund (EDF) warns that the emerging global food crisis is a glimpse of the world’s future.

“The war in Ukraine is a wake-up call”, says EDF CEO Amanda Leland.

“This is what happens when you disrupt the global food system, and that’s exactly what climate change is doing, except on an even larger scale, with long-lasting consequences.”

Heat waves, storms, fires and floods had already put the world in a precarious position, he says. Putin’s war just pushed him over the edge.

food for thought

Putin is confident that fertilizers are a powerful economic weapon. He has told Russian media that “the West will continue to buy them… Nobody wants to starve.”

The United States classifies fertilizer as an essential resource. Therefore, it is not subject to sanctions.

The EU has imposed quotas. But it still needs Russian supplies to meet demand.

And the Russian president knows that raising fertilizer prices will be a vital stimulus to his sanctions-hungry economy.

It is a deadly game.

The combined fuel and fertilizer crisis “is going to affect all production in the world.” says International Food Policy Research Institute (IFPRI) analyst David Laborde. “It’s not just wheat.”

And today’s turmoil can’t help but send a tsunami of trouble through the upcoming planting season, ensuring high prices and supply shortages for months to come.

“Problems with fertilizer supplies could lead to serious food crises and catastrophic famines in states like Afghanistan, Yemen and Syria,” says Dr. Sergey Sukhankin, an advisor to Gulf State Analytics. “Some experts argue that if the situation worsens, the Greater Middle East could experience events similar to the 2010-2011 Arab Spring.”

That, at least according to the Russian media, is the intention.

“Russia hopes that [fertiliser sanctions] it will result in a global food crisis, mass famine and socio-economic disruption in the less developed world, forcing developed countries to take a more cooperative approach towards Russia,” says Dr. Sukhankin.

It is a crisis that could spread throughout the world.

“People will react when they’re hungry … when the cost of food gets so high that they can’t pay their rent,” Chicago Council analyst Catherine Bertini told Foreign Policy.

Jamie Seidel is a freelance writer | @JamieSeidel

Read related topics:Cost of living

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