The Effects Of The Russian Ukrainian War On The International Trade Term Paper

Length: 19 pages Sources: 34 Type: Term Paper Paper: #67351130 Related Topics: European Union, Natural Gas, Labor Market, Refugee Crisis Published September 18, 2022
Excerpt from Term Paper :

Abstract

The war between Russia and Ukraine initially began in 2014 and continues even in 2022. The Ukrainian revolution caused the war, and recently, a full-scale invasion of Russia in Ukraine has been done because Ukraine wants to join. NATO, while Russia believes that Soviet Russia formed Ukraine and has to follow what Russia believes in. the war has had enormous effects on these two nations and the world. Both countries are the largest wheat, natural gas, and oil producers. The war has led to an increase in the demand for such goods, which has led to a rise in the prices and even caused an increase in food items. Most nations have begun economic sanctions on Russia, affecting its economy. Nevertheless, NATO and other nations have accused Russia of invading Ukraine, which is why most countries have condemned the act through economic sanctions (Materniak, 2020). However, they have led to a rise in oil prices and the cost of living. The war's future remains unknown and cannot be predicted, but what is known is that it has caused hyperinflation and financial contagion. The entrepreneurs and companies from Russia have been banned from other countries, and the operations of all those involved have been prohibited. The war has destroyed many kilometers of roads and railways in Ukraine and Russia, and rebuilding the countries is expected to be a considerable challenge, mainly as the refugees are fleeing out of the war-zone areas. The crises have affected all aspects of life, and the leaders in both countries have been in the limelight looking at how they will deal with the problem (Materniak, 2020). The economic activities in both countries remain at a standstill. The war is expected to cause more harm to both nations and others at large as they try to end the war. Global organizations like the United Nations have attempted to mediate the issue and ensure the war ends, but they have not succeeded.

Keywords: Russia-Ukrainian war, hyperinflation, refugees, sanctions,International Trade.

Hyperinflation: The effects of the Russian Ukrainian war on the International Trade

Introduction

The war between Russia and Ukraine started in 2014 after creating the Ukrainian Revolution of Dignity. In the beginning, the war focused on Crimea and Donbas' status. These two areas were initially considered to be part of Ukraine. The war has been ongoing to date. The conflict's first eight years were mainly about cyber warfare, political tensions, and other incidents. After the military build-up on the Russian border in October 2021, the competition grew, making the nation completely invade Ukraine on February 24, 2022 (Elyatt, 2022). The massive military build-up at the Russian-Ukrainian border indicated a looming war. Moreover, NATO accused Russia of planning the invasion of Ukraine even though it denied it. Vladimir Putin, Russia's president, criticized its enlargement, claiming that it was a threat to the country, and they demanded that Ukraine be barred from joining military alliances (Chemakin,2021). Moreover, Putin also showed Russia's irredentist views and questioned for Ukraine to exist, claiming that the Soviet Union formed the nation.

Russia officially recognized the presence of two self-proclaimed separatist states in Donbas on February 21, 2022. The country sent troops to invade Ukraine, and after three days, the invasion started. The International Community blamed Russia for its actions in the post-revolutionary nation of Ukraine (Jakubec, 2022). The other countries accused Russia of breaking international law and violating Ukraine's sovereignty. Most countries implemented economic sanctions against Russia, and this had financial implications. When Russia invaded Ukraine, no one knew how long the conflict would last and the depth of the shockwaves sent to Europe and the rest of the globe (Elyatt, 2022). The war is approaching its third month, it fell out from the conflict and is becoming more apparent, and the outlook is not favorable (Vaitilingam, 2022). The war has led to energy and food prices, further disrupting the supply chains. The war has been the cause of hyperinflation, threatening global economic growth with its humanitarian and economic impacts and how it affects the labor market.

Humanitarian and Economic Impact of the War in Ukraine

Launching a full-scale invasion of Ukraine led to a vast deterioration in Ukraine's humanitarian situation. From a historical perspective, the most significant detrimental impact of the war and the direct effects of the capital goods further led to collateral damage arising from them. The war disrupted public services and interrupted the production chain (Chemakin, 2021). It has also led to uncertainty and market disintegration, which is dangerous for the people. In the event of substantial refugee flows, there has been a massive loss of human capital. The modern era has led to damage caused by the war, which is only reduced if someone avoids armed warfare in urban areas. Unfortunately, this has not occurred for Russia and Ukraine since the fight started in 2014, and it turned to full-scale recently (Elyatt, 2022). The Russian armed forces have not been able to cut the Ukrainian troops from significant cities except Kherson. As it defended the positions being set in cities, the Russian forces began engaging in warfare, which caused enormous collateral damage to the people's infrastructure, including the electricity, sewerage and grids, and heat and water supply systems (Jakubec, 2022). This damage to the infrastructure has been the cause of increasing the risks of starvation in the urban population. There has also been a massive spread of the disease and quick deterioration in mental and physical health.

The war has also led to the Russian armed forces' indiscriminate bombardment of Ukraine's residential areas. This has destroyed the more significant parts of the buildings and infrastructure in the Ukrainian regions attacked. Some estimates showed that at least 36 healthcare facilities, 411 educational institutions, 1600 residential buildings, 26 factories, and six thermal power plants were damaged in the first three weeks of the war (Vaitilingam, 2022). Additionally, the damage was extended to a 5000km railway, 15000km of roads, 350 overpasses and bridges, and 15 airports. These damaged objects add up to 62.6 billion (Strauss, 2022). Moreover, the cost of repairs is most expected to be higher than it was initially thought to be since the items need to be rebuilt from scratch. The economic activities in these regions have also been affected. Maintaining medical services, retail trade, and public utilities becomes hard. The Russian invasion led to the stoppage of 30% of the Ukrainian economy leading to the complete ceasing of operations in 42% of the Small and Medium-sized Enterprises (SMEs), and 31% of them suspended their opeations and intend to resume soon (Strauss, 2022). Moreover, only 14% of these SMEs had applied for monthly state aid of USD 222 per SME. The losses from the war could be between a third to half of Ukraine's GDP, which shows that the war has had a detrimental effect on the nations involved. This has made Ukraine lose its ability to sell over half of its exports, mainly metals and other agricultural commodities (Jakubec, 2022). The merchandise exported can be accounted for almost a third or more of the nation's GDP.

The war against Ukrainian the Russian sanctions have hit other global economies. The emerging markets and developing nations in Central Asia and Europe are expected to bear the burden of the effects of the war. The forecast for its economy is expected to have a 4.1% reduction compared to the estimates that it will experience a 3% growth. The economy continues to shock people from the war. This compares to the ongoing effects of the COVID-19 pandemic (Vaitilingam, 2022). The battle is expected to make the economic situation in the nations worse since it will lead to a more contraction of the economy (Jakubec, 2022). The Ukrainian economy is expected to shrink by about 45.1% this year, even if the contraction's size depends on the war's duration and intensity (Strauss, 2022). Many sanctions have hit Russia, which has made the country get into a deep recession.

The weight of the humanitarian crisis that the war has caused is staggering. The Russian invasion has delivered a significant role in the economy of Ukraine, and this has damaged its infrastructure. Ukraine requires a lot of financial support as it tries to keep the economy. The government supports the Ukraine citizens who have experienced a lot of suffering and coping issues as the war continues. Nonetheless, the war has also added considerable concerns to the sharp global slowdown, debts, surging Inflation, and increased poverty levels (Chemakin, 2021). The economic effects have been caused through channels such as the financial and commodity markets, migration and trade links, and even the negative impact on confidence. The war has downgraded the growth projections in almost all economics, and spillovers from the war have caused this. These reactions have been weaker when compared to the growth that the euro area is expected to make and have led to trade and financial shocks in most countries.

Both Ukraine and Russia account for almost 405 of the wheat imports and 755 in the South Caucasus and Central Asia. Russia is a significant wheat exporter destination for most nations, and the remittances from Russia are almost 30% of the GDP of Central Asian Economies, including Tajikistan and the Kyrgyz Republic. The war, combined with the COVID-19 pandemic, shows that crises could lead to massive economic damage and set up many years of the per capita income and the developmental gains (Strauss, 2022). The governments in these regions should try and fortify the macroeconomic credibility and buffers of the policies they have developed that may contain risks. These governments must deal with any fragmentation of the investment that may create and take channels to strengthen the social safety nets to protect the most vulnerable individuals like the refugees. They do not lose focus on improving the energy making the future more efficient and sustainable.

Hyperinflation as a Result of the Russian-Ukrainian War

The global financial markets have continued to focus on the war, entering its second phase where fierce fighting has started in the eastern part of the nation. The analysts are saying that the battle for Donbas could determine the war's outcome. Investors are rattled by the constant Inflation and the dampening effects on the world's growth. The International Monetary Fund (IMF) predicts that the American inflation rate will reach 7.7% this year and 5.3% in the Eurozone (Bloomberg, 2022). There have been concerns over the increasing prices that prompt the investors to sell bonds, which pushes the yields higher. Most investors expect that the central banks will introduce a more aggressive and better interest rate hike to control the prices. This move is expected to cause more market sell-offs. The waves of economic instability and tension that the Ukraine conflict has unleashed have shocked all economists, politicians, and investment analysts. The tension is because these professionals have caught Inflation in the supply chains; energy and agribusiness have been unchecked since they considerably affect the different countries since they act as a nuclear reaction (Bloomberg, 2022). They trigger several follow-up consequences, leading to cost assumptions on how interconnected the globalized economy is and how it is supposed to work.

Inflation has hit growth globally. The shock waves from the conflict are expected to occur in the future, and they will reverberate around the globe, with the IMF and…This is considered the best option (Astrov et al., 2022). However, the other part occupied by Russia may have challenges rebuilding after the war destroys since it will be mainly characterized by military conflict concentrated in these regions. The region will continue suffering from outward migration, implying that there will be a demographic shock that will affect the globe, which will last for a long and the world's economy has isolated except for the link with China. The most urgent tasks on the western side have created a plan to reconstruct post-war Ukraine (Astrov et al., 2022). To identify the most critical areas, including transport, housing, administration, and critical infrastructure, that need support and determine the support's expected time and scale sequencing. It also encouraged the return of all the immigrants going out of the nation due to the war. The support measures for them were vital through technical assistance, which the government would provide a better reform to make it easy to rebuild the economy.

The Marshall plan-type by the western support also shows the importance of creating assets by the Russian business people and how the western nations' accounts were frozen. This would be vital in rebuilding the country, even though it would be very complicated since it is illegal. Developing a close relationship with the rising Ukrainian Diaspora would be critical for future development. The war destroys the capital infrastructure. This could be followed by more positivity since the investments done after the war could create a more modernized infrastructure and new technologies and form support to develop advanced and efficient sectors. Ukraine's I.T. sector is booming (Astrov et al., 2022). The nation has relatively highly skilled labor that could allow for quicker digitalization of the economy and its linkage to the global and European production chains. The land reforms implemented in agriculture have many potentials to improve the nation that would come through a rise in investments to improve the economy (Astrov et al., 2022). For the integration or cooperation within the European Union, there are suggestions that Ukraine can participate in primary E.U. programs in the same way the nation are E.U. members, facilitate cohesion of funds, exchange programs, and scientific and research cooperation to improve its economy and even materialize the infrastructure project and other trans-European transport projects (Delardas et al., 2022). The nation may also develop common transition and energy policy projects linked with its New Green Deal.

The war is also expected to have massive effects on Russia. Currently, Russia faces a deep recession due to the war, mainly caused by the western sanctions imposed on it. Most of the costs that Russia is expected to bear will be done within a long time. For instance, its goods will be sold in less competitive markets due to reduced imports (Delardas et al., 2022). The nations will also miss the vital technology opportunities that may be transferred from abroad. Nonetheless, Russia may also experience an exodus of entrepreneurs, scientists, and other professionals, leading to a massive loss of human capital (Delardas et al., 2022). Additionally, harsh financial sanctions have been imposed where the organizations leave Russia to form better possibilities where the assets will be nationalized. It is also highly lamely that even though the sanctions will be eased at some point. It will prove that there has been a high-water mark for economic integration among the countries in the European Union (Delardas et al., 2022). Today, the Russian invasion seems to be set after 30 years of economic integration between Russia and the west.

The inclusion of the European Union into the Eurasian Economic Union is a great deal since it supports creative thinking mainly related to political reality. Nevertheless, it appears to be from another world. The existing rupture within the economic and financial links between the west and Russia depicts an intensified process of annexing Crimea and the exchange sanctions in 2014 (Delardas et al., 2022). The European Union's share in Russian trade activities has fallen since the global financial crisis. However, the decline became higher after 2014, which almost matches the rise in trade in China, the largest single trading partner. The gap between China and the E.U. has narrowed to importations.

Recommendations

Several recommendations could help with the hyperinflation caused by the Russia-Ukrainian war. The first is donating essential supplies. The other nations can donate cash through aid organizations and trusted charities instead of donating the goods. The money is transferred faster to the areas required, and aid organizations may use it to buy the necessary things. Unsolicited donations of items could obstruct the supply chain and delay urgent life-saving help involved. Essential items would be sanitary products, clothes, and first aid kits to prevent further war loss. The other nations should join seminars and conferences to find a long-lasting solution to the hyperinflation challenge. It would help find alternatives to the items mainly supplied to the rest of the world from Ukraine and Russia and help regulate the food prices.

Limitation to the Recommendations

The main limitation to regulating food prices is that it may be more expensive for nations to find alternatives to the goods produced mainly in Ukraine and Russia. The governments may provide goods that may not be of excellent quality due to the rush they employ in manufacturing them. Providing donations to Russia and Ukraine may be a bad idea since it would show that instead of helping these countries find a solution to end the war, the other countries are supporting them to continue fighting.

Conclusion

In summary, the war between Russia and Ukraine has created new challenges. It has led to hyperinflation, where food prices have risen. These…

Sources Used in Documents:

References


Astrov, V. et al. (2022). Russia's Invasion of Ukraine: Assessment of the Humanitarian, Economic and Financial Impact in the Short and Medium Term. Policy Notes and Reports 59. file:///C:/Users/admin/Downloads/russia-s-invasion-of-ukraine-assessment-of-the-humanitarian-economic-and-financial-impact-in-the-short-and-medium-term-dlp-6132.pdf


Bloomberg. (2022). Russia-Ukraine war impact: US inflation rises to new 40-year high. Business News, Finance News, India News, BSE/NSE News, Stock Markets News, Sensex NIFTY, Budget 2022. https://www.business-standard.com/article/international/russia-ukraine-war-impact-us-inflation-rises-to-new-40-year-high-122041201337_1.html


Chemakin, A. (2021). The Ukrainian people's Gromada in the Civil War: Ukrainian conservatives, Russian statists, or Little Russian patriots? Quaestio Rossica, 9(1). https://doi.org/10.15826/qr.2021.1.568


Delardas, O., Kechagias, K. S., Katsikas Triantafyllidis, K., & Giannos, P. (2022). Concerns about academic freedom caused by the Russia–Ukraine war. EMBO reports 23(5). https://doi.org/10.15252/embr.202255079


Ellyatt, H. (2022). From soaring food prices to social unrest, the fallout from the Russia-Ukraine war could be s. CNBC. https://www.cnbc.com/2022/04/21/from-food-to-inflation-the-russia-ukraine-war-has-a-global-impact.html


Hudson, M. (2019). Ukraine and the new economic cold war. Russia, Ukraine and Contemporary Imperialism, 68-81. https://doi.org/10.4324/9781315205625-4


Jakubec, M. (2022). Ukraine-Russia crisis: Asian economies brace for inflation hit. https://www.aljazeera.com/economy/2022/2/25/ukraine-russia-crisis-asian-economies-brace-for-inflation-hit


Kuzio, T. (2021). Russian nationalism and the Russian-Ukrainian war. https://doi.org/10.4324/9781003191438


Materniak, D. (2020). Hybrid war: Russian doctrine and lessons from Russian-Ukrainian war. Strategic Panorama, (1-2), 42-47. https://doi.org/10.53679/2616-9460.1-2.2020.05


Strauss, A. (2022). Forbes. https://www.forbes.com/sites/adamstrauss/2022/01/27/the-reasons-why-a-war-in-ukraine-will-make-inflation-worse/?sh=382a53b2c2d3


Vaitilingam, R. (2022). Economic consequences of Russia's invasion of Ukraine: Views of leading economists. https://voxeu.org/article/economic-consequences-war-ukraine-igm-forum-survey


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