Cannons of the destructive economy.. How is the world affected by the Russian invasion of Ukraine?

At that crucial moment when Russian tanks crossed the border into Ukraine, oil prices soared to near $120 a barrel for the first time in 14 years, and investors rushed to the safe haven of gold.

While Western countries imposed deterrent economic sanctions with the aim of forcing Moscow to retreat, successive losses were knocking on the doors of Asian, American, European and even Arab markets, which indicates one fact that the world cannot bear a war of that size today, and that the continuation of the military escalation throws everyone into a whirlpool of economic crises. .

A few hours after the start of the war was more than enough for everyone to realize what a new war means in Europe, but what is more dangerous than the resounding of cannons, and the dominance of red colors on global stock indexes, is that political alliances will be on the cusp of major strategic transformations, due to the expected position of all countries. The world, including the countries of the Middle East, from the Ukrainian crisis, which will undoubtedly affect politics and the economy globally for years to come.

Days after the invasion.. what happened to the economy?

Gas prices in Europe jumped by about 35% a few hours after the start of the invasion, and reached their highest levels in almost a decade after news of the attack on a Ukrainian nuclear plant.

In contrast to China, which sits on the throne of the second largest global economy after the United States, Russia's weight in the global economy has decreased significantly, but despite that it still occupies a dominant position in the oil, gas and raw materials markets, making it more like a large gas station that maintains the operation of factories in The world, as Europe, which is the main victim of the Russian invasion of Ukraine, gets 40% of its natural gas and 25% of its oil from Russia, which controls Europe's energy despite the United States' attempts to reduce this control by providing alternative energy to its allies.

Although the West has taken clear steps to reduce the volume of its trade exchanges with Russia, as official figures indicate in the past two years, the Russian invasion of Ukraine a few days ago had a double effect on the European Union by raising prices and expectations of slowing growth.

For example, gas prices in Europe jumped by about 35% a few hours after the start of the invasion, and reached their highest levels in almost a decade after news of the attack on a Ukrainian nuclear plant, in light of investors’ fears that Russian natural gas supplies passing through Ukraine would be affected.

Although the Russian "Gazprom" announced the continuation of pumping Russian gas to European suppliers, this did not prevent the European economy, which is thousands of miles away from the combat zones, from being affected.

According to the British Guardian, the events in Ukraine caused an unprecedented rise in wheat prices in European markets, which jumped by 20% for the first time in 9 years.

Apparently, Putin's reassurances about his unwillingness to invade all of Ukraine were lost as the war dragged on, pushing oil to record levels close to $120 a barrel.

And while the world has a present plan to control the significant rise in oil prices again by releasing some of their emergency stocks, in addition to putting pressure on OPEC to increase its production (the organization is still resisting these pressures to this day), it does not have the same options in the matter of gold (Russia is the third largest producer of it) which is governed by other special accounts, as the safe haven that investors rush to at the height of times of conflict. .

Russia inflicted severe damage on the global economy due to the recent escalation towards Ukraine, and incurred losses in five major axes: oil, energy, grain, stock market, and financial bonds.

With the course of events reaching a dead end, Western economic sanctions do not seem able to subdue Russia without harming the global economy, which is mainly suffering from several chasing crises, from lowering growth expectations, high oil prices, and with it the prices of a wide range of food commodities, and the arrival of Inflation rates are at their highest level since 2008.

The Russian economy is also not excluded from the consequences of Putin's decisions, who seems ready to bear the consequences of his approach to invading Ukraine, whatever the losses.

In the wake of Western sanctions, the Russian ruble plunged to less than one US cent, while losses prompted the Moscow Stock Exchange to suspend trading for several consecutive days.

On the other hand, the situation was not better than in Russia. Kiev, which is facing internal crises in its economy, is close to knocking on the doors of donors and the IMF, in light of the reluctance of investors to enter its markets.

Sanctions..a double-edged sword

While it is difficult to estimate the true cost of the Russian invasion at the present time, experts indicate that the global economy will incur at least $400 billion in losses this year, especially with the expansion of the use of sanctions, and so far the United States of America, Britain, the European Union and Canada have imposed Japan and Australia imposed harsh sanctions on Moscow in an attempt to deter it from continuing the invasion.

The sanctions imposed on Russia are currently the largest in history, according to US President Joe Biden himself, as the sanctions included Russian President Putin and his Foreign Minister Sergey Lavrov and an elite of his most important aides, all members of the Russian National Security Council, the business class and oligarchs close to the Kremlin, as well as It covered almost every field from banking and financial transactions to aviation, military industries, and even energy.

The biggest step in this regard is the selective disconnection of a number of Russian banks from the system of global interbank financial communications "SWIFT", a step that, if expanded, threatens to completely separate Russia from the global economy.

These tough sanctions will surely be heard throughout the economy, not only in Russia, but also in Europe and the world at large.

But Moscow still has a trump card that the West has so far avoided seriously including in the sanctions, which is energy sales, due to fears of the impact on European countries that depend mainly on Russian gas in light of the low strategic stockpile, and in light of the difficulty of compensating for any shortfall in Russian supplies in The already significant rise in energy prices remained.

Other than oil, Russia has another card that economists consider to have a deadly impact on the global economy. Moscow - and as the largest exporter of minerals in the world - has the ability to impede major industries in the United States and Europe by restricting the supply of minerals, amid an actual rise in the prices of several raw materials, such as Cobalt, lithium and nickel.

All of these considerations were present before several countries that did not rush to denounce the Russian intervention in Ukraine, as their positions may have devastating consequences on their economy in the future, before Washington succeeded in mobilizing Europe, which was soon convinced that the Russian invasion is an existential risk that outweighs any potential economic losses.

interests game

The economic effects of the war are not limited to those from Russia only, Ukraine, in turn, appears to have its share of the effects.

Kyiv sends more than 40% of its exports of wheat and corn to the Middle East and Africa, and Ukrainian wheat is one of the main imports for 14 countries, half of those countries mainly suffer from acute food insecurity, and fear that the war will disrupt the access to food supplies, and at the top of the importers we find Some Arab countries, such as Lebanon, which imports half of its wheat needs from Ukraine, in addition to Egypt, which recently discussed importing wheat from 14 other countries.

According to a recent United Nations report, Russia is the largest supplier of wheat in the world, and with Ukraine accounts for nearly a quarter of the total global exports, and the two countries together provide more than 70% of the total wheat imports to Egypt and Turkey, which put the latter in a political impasse following the Ukrainian government’s demand It has to close the Bosphorus and Dardanelles straits to Russian ships.

In the end, Turkey found itself obliged to take the difficult path of neutrality between the two conflicting parties in order to avoid the destructive effects of siding with either of them, just as the Israeli occupation state did, which retreated from the declared bias towards Ukraine, after Russia punished it by denying its alleged sovereignty over the Syrian Golan Heights.

Likewise, Arab Gulf states have sought to keep lines open with both sides of the crisis, despite responding to pressure from Washington to vote to condemn Russia at the United Nations.

And it has become clear that many Arab countries, allies of America, are not willing to risk undermining their relations with Moscow for various considerations, whether it is partnership in the field of energy, as in the case of Saudi Arabia and some Gulf states, or economic issues such as wheat and tourism in the case of Egypt, or even military considerations. And fears of losing an important supplier of weapons.

Day after day, then, the Russian-Ukrainian war proves that it will not remain confined to its geographical scope, and that it will play a role in redrawing the map of alliances and enmities in a turbulent world.