Impact of Russia-Ukraine crisis on Global economy
- Several large Western companies have built up businesses in both countries and these have a great role in the supply chain across the world
- Russia’s invasion of Ukraine heaps fresh risks on a global economy already struggling with soaring inflation and supply-chain snags amid the recovery from the pandemic
Oil and Gas
- Energy companies are among the most exposed to the region with several major oil companies building up sizable investments in Russia.
- While those companies will benefit from higher commodity prices, they could also be among those potentially exposed to sanctions or disruption in Russia.
- Several large consumer-goods companies have factories in Ukraine, including Danish brewer Carlsberg A/S, Swiss food giant Nestlé SA,etc.
- All of these companies have suspended operations in the country in recent days, calling for their staff to stay safe at home.
- This disruption in production will impact the global supply chain in coming time
- Several major automakers have operations in Russia, with some deciding to pull back in light of the conflict, and others warning of disruption to their businesses.
- Companies are uncertain about their operations there because of potential risks associated with trading with Russia, including the sanctions imposed by the EU and U.S
- Worsening tensions between Russia and Ukraine could lead “to another supply-chain crisis linked to parts that would have to come from abroad.""
- Auto makers which are already struggling with a shortage of semiconductors could also face additional problems if Russia’s supply of palladium disrupts further
- The fallout from the invasion has led dozens of countries to ban Russian airlines from entering their airspace, triggering reciprocal prohibitions from Moscow.
- While Russia is a busy route for some Western carriers, the bigger disruption comes from the restriction of Russian airspace, which is used to connect most flights between Europe and Asia.
- Ukraine relies heavily on medicines from overseas
- It has imported medicines and vaccines worth $2.5 billion in 2020, according to United Nations trade data.
- Global pharmaceutical companies are looking to ensure that their medicines and vaccines can continue to reach Ukrainian patients and a health crisis do not happen there
- In recent years, companies in the U.S. and Europe have outsourced tech services to Ukraine.
- Following Russia’s incursion, internet outages occurred across the country, according to a monitoring dashboard run by the Georgia Institute of Technology.
- Disruption in outsourcing can further disrupt businesses across US and Europe
- U.S. agriculture companies operating in Ukraine are closing offices and facilities in the country in response to Russia’s attack.
- Ukraine and Russia account for 30 per cent of the world's exports of wheat, 19 percent of corn and 80 percent of sunflower oil, which is used in food processing.
- Much of the Russian and Ukrainian exports goes to poor, unstable countries like Yemen and Libya.
- The threat to farms in eastern Ukraine and a cutoff of exports through Black Sea ports could reduce food supplies just when prices are at their highest levels since 2011 and some countries are suffering from food shortages.
- Russia and Ukraine together supply 13 per cent of the world's titanium, which is used to make passenger jets and 30 percent of the palladium, which goes into cars, cellphones and dental fillings
- Russia also is a major producer of nickel which used to produce electric car batteries and steel
- Disruption in supplies or sanctions from west can create a serious shortage of these significant minerals and further impact the manufacturing industry across the world
- The world's unexpectedly robust recovery from the pandemic recession left companies scrambling to find enough raw materials and components to produce goods to meet surging customer demand. Overwhelmed factories, ports and freight yards have meant shortages, shipping delays and higher prices. Disruptions to Russian and Ukrainian industries could delay any return to normal conditions.