How The War In Ukraine Has Impacted Global Resources

By Jerome Lau, Marketing Director at King’s Commercial Awareness Society

Russia’s invasion of Ukraine has affected a multitude of lives on both fronts, with thousands of lives lost and families broken. The wider impact of the war on the rest of the world has been detrimental, having brought much economic instability.

Russia is the world’s largest exporter of natural gases, and fertilisers, and among the largest suppliers globally of metals like cobalt, vanadium, gold, lead, nickel, platinum, tungsten, manganese and copper. The prices of these metals have soared or have been hitting record high mainly due to fears of economic sanctions affecting these supplies, with the London Metal Exchange even suspending nickel trading due to the unprecedented price fluctuations.

Ukraine and Russia jointly account for a significant majority of grain supply, namely 29% of global wheat exports, 19% of corn exports and 80% of sunflower oil exports. The invasion has shaken grain markets, with European wheat futures surging to a record high near the outbreak of the war, as the war closed off Ukraine’s Black Sea ports, driving up global food prices and prompting fears of shortages in Africa and the Middle East.

However, despite Ukrainian grain exports having returned close to pre-war levels just last October, thanks to the Black Sea deal deal between Moscow and Kyiv, brokered by the United nations and Turkey at the end of July earlier this year, Russia’s decision to suspend the agreement has reintroduced an element of economical uncertainty and questions of safety for any exports which may come in the future.

Russia’s role as the main supplier for gas not just for many countries in the EU, but for the UK as well has caused shockwaves on all the countries reliant on their exports, and some countries are certainly still dealing with the repercussion of Russia withholding their resources from the rest of the world as the war began.

On the EU’s side of things, the Versailles Declaration in March 2022 served to phase out the EU’s dependence on Russian Fossil fuels as soon as possible. However, this does not necessarily mean that countries within the EU will not face any issues, as they had over 50% of their gas supplied by Russia in January 2021.

While the statistics provided by the EU commission have shown a significant decrease down to just 17%, what this data does not show are the real-world impacts of this. The EU has been mainly compensating for this via diversification away from natural gases, shifting this reliance onto liquified gas (LNG) from the US, having imported roughly 4.1 billion cubic meters of LNG in June this year, with significant increases having begun since November 2021, presumably in anticipation of the growing tensions between Russia and Ukraine.

On local grounds, the current energy crisis faced in the UK is the culmination of the increased demand for energy during the post-Covid reopening of economies coinciding with the war on Ukraine, which led to the price hike in living expenses. While household residents with deeper pockets should be able to cope with the effects, these price hikes will be ‘a catastrophe for the poor’.

Contrary to the EU, The UK does have a slight advantage in not being overly dependent on foreign sources of gas asroughly 50% of the UK’s gas needs being sourced from the UK Continental shelf.

While there is no direct impact on the UK due to the issues with gas and oil, the effects of the war are seen on international gas markets, with Russia having withheld its resources over the past 18 months. This, in turn, increasedthe amount which the UK pays for gas, with a significant drop in supply causing a steady and insidious upward trend in gas and oil prices.

The UK has continuously raised the price cap for gas prices over the past year, having risen from £1,971 since April 2022 to £2,400 in October 2022, with this causing some businesses to ditch office space to save money due to the effects of the war resulting in soaring energy prices alongside the lingering effects of the pandemic encouraging hybrid working styles.

Combating this trend however, is the threat of job cuts and these increases in domestic energy costs which may encourage workers to venture back to offices in the UK, as predicted by Jacob Aarup-Anderson, the chief executive of ISS, a £3bn-company that manages offices for some of the world’s biggest companies.