An armed conflict will always be a cause for concern due to the enormous risk to people’s lives. But the consequences of a war transcend the battlefield, especially in a world as interconnected as the one we live in currently. A confrontation between Russia and Ukraine could significantly affect the West’s post-pandemic economic recovery.
Russia says it opposes the presence of NATO military forces in Ukraine, while Ukraine warns that the Russians have plans to expand their military presence in preparation for a possible invasion of the strategic region.
Below is an analysis by economists and political analysts on the possible consequences of a war between Russia and Ukraine.
Threats to a recovering economy
We are gradually returning to a more active economy as COVID-19 restrictions are being lifted. However, there are multiple challenges to overcome. Here are a few examples:
1) The rampant inflation affecting the United States.
2) The underlying supply chain crisis and the lack of electronic chips, which has contributed to an increase in the prices of many products.
3) The persistent shortage of workers, especially in the service sector.
4) The extraordinary cost of a barrel of oil, which raises the price of gasoline and hence practically all products that are transported.
In the midst of this delicate situation, a war between Russia and Ukraine would not only destabilize that region and alter the geopolitical landscape; it would also generate a domino effect in the world economy, which would trigger greater inflation and impact your wallet.
A war would drive up gas prices
Russia is one of the most important producers of crude oil and natural gas, products that it sells primarily to Europe.
Any disruption to oil flowing from Russia could easily send oil prices to $120 a barrel or even higher, said Natasha Kaneva, head of the Global Commodities Strategy team at J.P. Morgan.
The shortage would inevitably raise the price of gasoline throughout the world at a time when there is an increase in fuel consumption.
More inflation, less purchasing power
The annual rate of inflation in the United States accelerated to 7.5% in January, the highest figure since 1982.
If the conflict between Russia and Ukraine raises the price of oil to $110 a barrel, inflation in the United States could exceed 10%, according to an analysis by RSM. This would directly affect your family’s shopping cart because it would make basic products more expensive.
Diplomatic efforts vs. geopolitical ambitions
This is not the first time that Russia has sought to expand its territory. In 2014, it annexed the Crimean Peninsula, which previously belonged to Ukraine, through a series of political and military moves.
At that time, Russia received strong economic sanctions that affected the country. The difference between that situation and the current conflict is that now the Russians have the backing of China.
During a meeting on February 4 between leaders Xi Jinping and Vladimir Putin, the Chinese leader supported Russia’s “legitimate” security concerns and stressed that they oppose further NATO expansion.
Given this, Russia is less afraid of sanctions from the West and is giving greater influence to China, the main beneficiary of a war between Russia and Ukraine.
President Joe Biden has proposed various methods for dialogue with the Russian leader, but in the coming days the true result of this diplomatic effort will be seen.
It is unlikely that an armed conflict between Russia and Ukraine would escalate into a world war. Even so, the truth is that we live in a highly connected world where a confrontation on one side of the globe can directly impact your wallet.
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