Updated: Oct 27
Russia invaded Ukraine on the 24th of February, 2022. However, this conflict goes back to the 18th and 19th centuries. At a point in time, Russia used to own Ukraine as part of the Soviet Union. When the union fell apart, The National Atlantic Treaty Organization (NATO) was formed to safeguard the countries and ensure their freedom against Russia. This was on a condition that the countries bordering Russia weren’t allowed to join the alliance. When Ukraine pushed hard to join the alliance, Russian President Vladimir Putin launched a military invasion.
The objective of this research paper is to learn more about, analyse, and interpret in depth of how the world and countries that are going through war- in this case Russia and Ukraine, are influenced. We'll be looking at how the conflict has affected India in particular, as well as whether Prime Minister Modi's response was accurate. Will this have an impact on India's and other countries' futures?
The world has become a global village and even the slightest change in economy has an impact on everything else in most circumstances.
WHAT’S THE IMPACT OF WAR ON A COUNTRY’S ECONOMY?
A war has a tremendously expensive and, in most cases, disastrous effect on a country. The economy in most cases experiences inflation.
This occurs because a government in the midst of a war will levy greater taxes on people's salaries in order to be able to keep up with the demands of the people as well as needing money to fund the ongoing war.They also need to preserve the value of money after the war settles down. People end up losing jobs, experience shortages and debts.
HOW DOES A WAR AFFECT THE WORLD?
Today's world is more connected than it has ever been. This is due to globalisation, a term used to describe the free flow of trade and services, capital, technology, labour and force of culture. Whether it be due to technological advancements, cross-border commodity commerce, information, and so on. As a result of globalisation, the entire world is affected in some way or the other when a crisis such as a war or a pandemic occurs.
In a situation of a war, the neighbouring countries are usually the ones who suffer the most. This could be due to people fleeing conflict-torn countries and seeking refuge as soon as they can. This places a significant burden on the country's resources. Even countries with significant trade ties to the conflicting countries are impacted. A decrease in commodity supply not only raises prices, but it also lowers customer confidence.
Inflationary pressures reduce income and decrease demand for goods and services. The Countries that were already poor, suffer greatly as a result of financial tightening, lowering demand. It will hinder economic progress and may exacerbate social unrest, particularly in countries that rely on food and energy imports, among other things. If we analyse the situation more carefully, we can see that the welfare rates will go through a significant decrease.
The long term consequences can impact the global food supply system and interconnected financial markets. Policymakers will have to establish a difficult balance between limiting inflation and assisting the revival of the economy. Nations which have weak welfare systems
and fewer work opportunities will be affected the most.
In the pages that follow, we'll look at this in further depth with regard to Russia and Ukraine.
SANCTIONS IMPOSED ON RUSSIA
The Russian Economy growth has reduced because of the sanctions other countries have imposed on it as a response to the military invasion. Some of the major sanctions imposed by countries are listed below:
The United States of America and The United Kingdom have prohibited new investment in Russia
European Union along with other countries plan to disconnect Russia’s largest bank-Sberbank
Countries including the United Kingdom, Germany seek to terminate their reliance on coal, oil, and gas by the end of the year 2022. The United States have prohibited imports of Coal and Oil from Russia.
USA has cut off the frozen funds of Russia making it harder for them to repay their international debts.
Australia and Japan have also imposed sanctions on Russia.
All the sanctions have caused a 14 percent increase in inflation all over the country. Russia has responded by prohibiting the export of more than 200 products. And also prohibiting companies from paying foreign shareholders.
UKRAINE’S ECONOMY AFTER THE WAR BEGAN
Asides from thousands of people having to abandone their homes and seek refuge in underground metros and bunkers, many are fleeing the country. Ukraine’s economy has been affected in a disastrous manner.
After the war began, the country's GDP shrank by 45 percent. The most immediate reaction to Ukraine is a dramatic increase in commodity prices. Ukraine currently has fewer supplies and higher pricing. Energy, fertilisers, and food were all critical commodities coming out of Ukraine and Russia, but they have all been temporarily suspended due to the ongoing conflict.
Fuel costs in Ukraine have been rapidly climbing as well. However, this began well before the war, in the year 2020. Ukraine is short on manpower, infrastructure, and manufacturers as a result of the war, and it is unable to supply other countries. As a result, it is not receiving enough money to continue producing whatever it can. Increased prices result in a decrease in real income.
HOW HAS GLOBAL TRADE BEEN AFFECTED?
Russia has blocked Ukraine’s black sea ports after the war began which has led to some serious food shortages. Ukraine being one of the critical exporters of various agricultural products, not only Ukraine but several other countries are taking the hit.
Without the necessary agricultural products many countries will suffer food shortages. The countries who are poor will suffer the most. Such an act demands a global response since it will wreak havoc on the food supply chain in the long run.
The world goes through a crisis for oil, natural gas and various other products that were being exported from Russia and Ukraine and suffers from inflation.
HOW HAS INDIA BEEN AFFECTED?
The ongoing conflict between Russia and Ukraine has had a significant influence on countries all over the world. With regards to its economic impact on a growing country like India, it has slowed economic growth, increased cost of oil imports, had an impact on food grains, reduced supply of chips resulted in shortage of automobiles & electronics and military hardware.
India is short on oil and energy, and thus it imports a significant amount from Russia. Infact, around 90% of sunflower oil is imported from Russia and Ukraine together. Following the war, the cooking Oil production in both these countries fell down drastically along with multiple sanctions being imposed on Russia prohibiting their export and sale of Oil to other Oil importing countries. As a result, international prices have skyrocketed. India, as a major oil importer, is now forced to import oil at exorbitant prices.
High oil and natural gas prices have resulted in high inflation which has slowed the economic growth forecasts. The west has made its feelings known over India's decision to import oil from Russia, while India has made it clear that local concerns must come first in international policies and economic decisions. Due to the spike in crude oil costs, India would have to progressively raise prices to make up the loss. In Delhi, prices of crude oil in November was around 70$ a barrel, while now it is 110-120$ a barrel.
Russia and Ukraine were also major food grain exporters, particularly to European countries. They had a combined market share of 25% of the worldwide wheat economy. Because of the war, production has been limited, and sanctions and other restrictions prevent them from exporting goods. As a result of the conflict, many of Ukraine's lands are no longer cultivable. Because India is also a large producer of food grains such as wheat, the world, particularly European countries, look to it for wheat and other grains. India has restricted wheat exports in order to meet domestic demand, in light of the heat wave in May of 2022.
Russia and India are allies in the defence supply chain. Russia's production has been impeded by the war, and it currently requires armed commodities for its own requirements. In November of 2021, India still received some of the products. Other countries, are pressuring India to cease acquiring Russian military gear. India is also concerned that China will take advantage of the current geopolitical scenario, in light of the recent border tensions.
Inflation has erupted all throughout the world as a result of the war. India has also suffered. The price of rupee has fallen as an impact of the war. As a developing country, it needs a lot of money for infrastructure. Infrastructure construction has gotten even more expensive as commodity prices have risen.
WHAT ARE OTHER NATIONS SAYING ABOUT INDIA’S RECENT DECISIONS
Other countries, including the United States, have expressed dissatisfaction with India's decisions, warning of "consequences" if it decides to join with Russia. Despite the fact that other countries have put sanctions on Russia, India continues to buy products from the country. This hampers relations with the United States, especially as it is seen as a strategic partner in countering Chinese influence in Asia.
Prime Minister Narendra Modi has opposed US and Australian accords to reduce the relationship's scope, claiming that India requires weaponry to combat Pakistan and China and that the alternatives are very expensive.
India now not only has to find a way to minimize the impact on food grains, military supplies, Oil and gas but also has to find a way to mantain it’s position in front of all the other countries. It’s position has become rather tricky as it has to still import many things from Russia while at the same time keeping peace and maintaining relationships with other nations.
In my opinion, India's Prime Minister has made the wisest decision conceivable in his situation. His decision does not sever his relations with Russia nor does it overtly embrace it. Why should India not support Russia today, as Russia has always supported India on the global platform as we have witnessed in the past? India gains from Russia, particularly in the area of armour, with Russia accounting for almost 46% of India's imports. The United States has never openly expressed it’s loyalty to India globally. In all actuality, the United States has forged ties with India solely because of China. Their government is acting out of self-interest, whereas India is backing its own.
The crisis between Russia and Ukraine has impacted not only the two countries, but all nations throughout the world in some way. Everyone has the right to speak up about such important issues and make informed judgments to limit the negative consequences. The war between Russia and Ukraine has shown the world that all countries must learn to be self-sufficient rather than relying on globalisation. At the end of the day, the question that needs to be addressed is whether violence is indeed the answer to all of our problems in the twenty-first century. Shouldn't we take into account the fact that citizens are suffering as a result of something over which they had no control to begin with? Why can we resolve such situations peacefully?
https://www.vox.com/videos/22960322/ukraine-russia-invasion-2022-nato (Accessed on 16/05/2022, 6:00PM)
https://www.bbc.com/news/world-europe-60125659 (Accessed on 16/05/2022)
https://www.britannica.com/topic/defense-economics/War-finance-when-deterrence-fails (accessed on 20/05/2022, 10:00AM)
https://www.bbc.com/news/world-europe-60125659 (accessed on 20/05/2022, 11:10AM)
https://www.weforum.org/agenda/2022/04/ukraine-war-global-trade-risk/ (accessed on 28/05/2022, 2:05PM)
https://www.youtube.com/watch?v=srgC6N5KZm0 (accessed on 28/05/2022, 1:50PM)
https://www.visionofhumanity.org/how-does-war-and-violence-affect-an-economy/#:~:text=In%20addition%20to%20causing%20suffering,effects%20even%20after%20conflict%20subsides. (accessed on 28/05/2022, 12:10PM)
https://energy.economictimes.indiatimes.com/energy-speak/russia-ukraine-war-impact-on-india-s-petroleum-sector/5243 (accessed on 28/05/2022, 12:40PM)
https://economictimes.indiatimes.com/news/economy/foreign-trade/russia-ukraine-war-impact-indias-grain-exporters-are-gearing-up-to-fill-the-huge-gaps-in-global-stocks-especially-wheat/articleshow/90464830.cms?from=mdr (accessed on 29/05/2022, 2:00PM)
https://www.deccanherald.com/business/business-news/us-warns-consequences-if-india-aligns-with-russia-1098293.html (accessed on 29/05/2022, 3:30 PM)
https://www.france24.com/en/europe/20220512-russian-blockade-of-ukraine-s-ports-puts-global-food-supply-at-risk (accessed on 29/05/2022, 4:05PM)
https://www.thehindu.com/data/data-india-reduced-arms-imports-from-russia-while-chinas-dependency-increased/article65248748.ece#:~:text=Despite%20this%20deviation%2C%20Russia%20has,in%20the%202017%2D2021%20period. (accessed on 29/05/2022, 7:10 PM)
Written and illustrated by Anvi Kedia