The global economy is at stake because of the conflict in Ukraine

Russia is a “big gas station” and a minor player in the international economy

More than 40% of Ukraine's wheat and maize exports go to the Middle East or Africa.

AFP

After suffering a major crisis due to the Corona virus pandemic, supply chain problems and price inflation, the global economy is preparing to move to another unpredictable path, due to the armed clash on Europe's borders.

Even before Russian forces entered the breakaway territory of Ukraine, tension between Russia and the West took a heavy toll, as President Joe Biden's promise to impose sanctions on Russia, potentially retaliating, slashed stock returns and increased gas prices.

Also, a Russian military attack against Ukraine could cause huge increases in energy and food prices, fueling inflation fears and panicking investors, a combination that threatens investment and economic growth in all countries of the world.

Although Russia is a large country with 146 million people, has a huge nuclear arsenal, and is considered a major supplier of oil, gas and some raw materials for industry, it is a minor player in the global economy unlike China, which is an influential industrial power.

Russia is not important

The New York Times says that Italy has half the population of Russia and fewer natural resources, but its economy is twice the size of the Russian economy, and Poland exports more goods and products to the European Union than Russia.

The newspaper quoted Jason Furman, an economist at Harvard University in the United States, as saying that “Russia is not important in the global economy, except for its production of oil and gas, as it is basically a large gas station.”

"A closed gas station can disrupt those who depend on it," Foreman added.

fuel and food

Europe gets about 40% of its natural gas and 25% of its oil from Russia, and it is likely to experience a huge rise in heating and gas bills, which have already risen.

And there are food prices that have risen to their highest level in more than a decade, in large part due to the chaos of supply chains.

Russia is the largest supplier of wheat in the world, and together with Ukraine it constitutes about a quarter of the total world exports of it.

This grain flow also constitutes more than 70% of the total imports of wheat consuming countries such as Egypt and Turkey.

«Breadbasket of Europe»

On the other hand, Ukraine has long been known as the "breadbasket of Europe" because it sends more than 40% of its wheat and maize exports to the Middle East or Africa, where there are fears that more food shortages and higher prices could lead to social unrest.

US sanctions

Although some of the sanctions America is considering include cutting access to the international payments system known as “SWIFT” or preventing companies from selling any product containing American ingredients to the Russian market, the United States is much less vulnerable than the European Union. Which is Russia's largest trading partner.

President Biden warned Americans of a rise in gasoline prices.

But given that the United States is itself a large producer of natural gas, these price increases are not as severe as elsewhere.

In Europe, oil companies such as Shell and Total own joint ventures in Russia, while BP is one of the largest foreign investors in Russia, and Airbus obtains titanium from Russia, whose citizens have obtained Billions of dollars in loans from banks in Germany, France and Italy.

Russia and China

The most significant effects of the Ukraine-Russia crisis on the global economy may only appear in the long term, and one of those results will be Russia's closer economic ties with China, with which it is negotiating a 30-year contract to supply China with Russian gas.

Europe's dependence on Russian gas stimulates discussions about the need to expand energy sources.

"In the long run, Europe will rush to diversify, and for Russia, the real cost will be devastating to it over time," said Jeffrey Schott, a fellow at the Peterson Institute for International Economics.

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