War in Ukraine: what economic consequences?

Commodity prices or envisaged sanctions… What are the economic consequences of the invasion of Ukraine by Russia? What could be the consequences of a country's isolation on the world economy and on Russia?

The Russian invasion of Ukraine has and will have repercussions on the global economy, notably on the price of raw materials, but also following a potential exclusion of Russia from the Swift network and possible economic isolation. Russian. Consequences all the more serious as it could be the most important conflict to take place on European soil since the Balkan wars in the 1990s.

Raw materials

 

Vladimir Putin chose to launch the offensive at dawn, Thursday, February 24, 2022. Around 5 a.m., Russian soldiers entered Ukrainian territory. The markets were still sleeping. At the opening, the price of raw materials soared.

The Russian economy depends on the export of raw materials. The sector represents 60% of Russian exports. Russia is the world's largest producer of wheat (Ukraine is fifth), one of the largest oil exporters, provides about 40% of European gas and produces large quantities of metals. The country is the leading producer of palladium, used for the construction of catalytic converters for cars in particular, the second largest producer of aluminum and nickel, and the seventh largest producer of copper in the world. Ukraine, on the other hand, is the world's largest producer of maize.

 

The barrel of oil exceeded 100 dollars per barrel, the ton of wheat reached a record level at 344 euros per ton and the price of natural gas jumped 40% in one day. Paradoxically, this is an advantage for Russia, because we have not stopped importing Russian raw materials for the moment. Germany, for example, is heavily dependent on Russian liquefied natural gas. Once an alternative to Russian raw materials is found, this excessive economic dependence will inevitably turn against the country.

 

However, it is currently difficult to do without Russian raw materials, especially gas. If Russian gas does not come to Europe, there is a real subject of gas prices in Europe. In other words, Europe currently has no immediate solution to replace gas imports from Russia.