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  • Writer's pictureJerome Lau

A general glance at the impact of the war between Russia and Ukraine on Global resources

by Jerome Lau on 12/12/22

Image source: Wix Media

Russia’s invasion of Ukraine has affected a multitude of lives on both fronts, with thousands of lives lost and families broken. The wider reaches of the war on the rest of the world amounts reaches into the millions, having brought much economic instability, which will be examined in this article.

Russia is the world’s largest exporter of natural gases, and fertilisers, and among the largest supplier globally of metals like cobalt, vanadium, gold, lead, nickel, platinum, tungsten, manganese and copper, with the prices of these metals having soared or hitting record high mainly due to fears of economic sanctions would hit these supplies, with the London Metal Exchange even suspending nickel trading due to the unprecedented price fluctuations.

Ukraine and Russia jointly account for a significant majority of grain supply, 29% of global wheat exports, 19% of corn exports and 80% of sunflower oil exports, with the invasion having shaken grain markets, with European wheat futures surging to a record high near the outbreak of the war, as the war closed off Ukraine's Black Sea ports, driving up global food prices and prompting fears of shortages in Africa and the Middle East.

However, despite Ukrainian grain exports having returned close to pre-war levels just last October, thanks to the Black Sea deal deal between Moscow and Kyiv, brokered by the United nations and Turkey at the end of July earlier this year, Russia’s decision to suspend the agreement has reintroduced an element of economical uncertainty and questions of safety for any exports which may come in the future.

Russia’s role as the main supplier for gas not just for many countries in the EU, but for the UK as well has caused shockwaves on all the countries reliant on their exports, and some countries are certainly still dealing with the repercussion of Russia withholding their resources from the rest of the world as the war began.

On the EU’s side of things, the Versailles Declaration in March 2022 served to phase out the EU’s dependence on Russian Fossil fuels as soon as possible, this doesn’t necessarily mean that countries within the EU will face a smooth from having over 50% of their gas supplied by Russia in January 2021.

While the statistics provided by the EU commission have shown a significant decrease down to just 17%, what this data does not show are the real-world impacts of this, where the EU has been mainly compensating for this via diversification away from natural gases, shifting this reliance onto liquified gas (LNG) from the US, having imported roughly 4.1 billion cubic meters of LNG in June this year, with significant increases having begun since November 2021, presumably in anticipation of the growing tensions between Russia and Ukraine.

On local grounds, the current energy crisis faced by the UK is the culmination of the increased demand for energy during the post-Covid reopening of economies coinciding with the war on Ukraine, with led to the price hike in living expenses that we currently face. While household residents with deeper pockets should be able to cope well with the effects, these price hikes will be ‘a catastrophe for the poor’.

Contrary to the EU, The UK does have a slight advantage in not being overly dependent on foreign sources of gas, this reliance plainly shows with roughly 50% of the UK’s gas needs being sourced from the UK Continental shelf.

While there is no direct impact due to these sources of gas and oil, on the UK, the effects of the war take shape via its impact on international gas markets, with Russia having withheld its resources over the past 18 months, this is turn increasing the amount which the UK pas for gas as a whole, with a significant drop in supply causing a steady and insidious upward trend in gas and oil prices.

The UK has continuously raised the price cap for gas prices over the past year, having risen from £1,971 since April 2022 to £2,400 in October 2022, with this causing some businesses to ditch office space to save money due to the effects of the war resulting in soaring energy prices alongside the lingering effects of the pandemic encouraging hybrid working styles.

Combating this trend however, is the threat of job cuts and these increases in domestic energy costs which may encourage workers to venture back to offices in the UK, as predicted by Jacob Aarup-Anderson, the chief executive of ISS, a £3bn-company that manages offices for some of the world’s biggest companies.

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