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Opinion: The economic impact of the Russia-Ukraine crisis

07 March 2022 | Story Sanet Madonsela | Photo supplied

SanetMadonsela_web read more — Sanet Madonsela is a PhD Candidate in the Centre for Gender and Africa Studies. She is also the Chairperson of the South African Association of Political Science's Emerging Scholars Research Committee and the Projects and Events Coordinator for the International Association for Political Science Students

Opinion article by Sanet Madonsela, PhD Candidate in the Centre for Gender and Africa Studies, University of the Free State.

On the 24 February 2022 the world woke up to the news of Russia announcing its’ “special military operation” to “demilitarise” and “deNazify” Ukraine. This announcement was followed by a sophisticated, all-out attack by land and air. As Russia began its invasion, the rest of the world watched in anguish, contemplating the unavoidable international political and economic implications.

There are competing views as to why Russia invaded Ukraine. Some argue that the attacks were based on Ukraine’s desire to join NATO, while others link the invasion to the Minsk agreements. The Minsk agreements are two treaties signed in 2014 and 2015 aimed at ending the war in Donbass. To provide a bit of context one needs to go back to 2014.

Resolution to recognise Donetsk and Lugansk

Moscow was angered that its candidate lost Ukraine’s presidential mantle in elections in 2014. This resulted in Donetsk and Luhansk announcing their autonomy from Kiev. In September of that year the government of Kiev and the separatist leaders agreed to a 12-point ceasefire called Minsk I. Despite the signing of the agreement, the fighting continued resulting in Russia, Ukraine and the Special Monitoring Mission of the Organisation for Security and Co-operation in Europe (OSCE) signing Minsk II. The agreement called on Ukraine to control the state border, constitutional reform and decentralisation. Despite an election held in 2018 in the eastern regions, the US and the EU have refused to recognise the legitimacy of the vote, thus, violating the agreement. The OSCE has reported significant daily increases in ceasefire violations in the affected areas since February 2014. While the US is not a signatory, it has expressed the importance of implementing the agreement. Instead of accepting the existing agreement, Ukraine allegedly never implemented its provision thereby incensing Moscow as well as ethnic Russians in Ukraine.

On 16 February 2022, the Russian parliament adopted a resolution requesting Putin to recognise Donetsk and Lugansk. This agreement was signed on 21 February 2022 and followed by a request to deploy armed forces. Inevitably the conflict dynamics have escalated.

While some believe themselves to be immune to the conflict, economists warn that it will have far-reaching global consequences as armed conflict tends to disrupt supply chains and increase the price of food and gas. They predict a further increase in oil prices per barrel as Russia is the world’s largest natural gas exporter and the second largest exporter of crude oil. This is important as oil prices directly impact transportation, logistics, and air freights. On Thursday, 24 February, global oil prices past $105 per barrel warranting these predictions. In addition, Russia is the world’s largest supplier of palladium, a material used by automakers for catalytic converters and to clean car exhaust fumes, a delay which would affect auto production. It is worth noting that Ukraine is a major provider of wheat, corn, and barley. A lack of yellow maize, or even a slowdown in production, could result in an increase of meat prices.

Exports and sanctions

Combined, Russia and Ukraine export more than a third of the world’s wheat and 20% of its maize. They also account for 80% of global sunflower oil exports. They supply all major international buyers, as well as many emerging markets. In 2020, 90% of the African continent’s $4 billion agricultural imports from Russia were wheat and 6% sunflower oil. South Africa does not produce enough wheat and is heavily reliant on imports from these countries. It imported more than 30% of its wheat from these two countries over the past five years.

Western states have announced a coordinated series of sanctions aimed at Russian elites; however, critics warn that they may be ineffective as the country’s economy is large enough to absorb even the most severe sanctions. Its central bank has more than $630 billon in foreign reserves and gold. Its sovereign wealth accounts for an additional $190 billion. Russian debt accounts for a mere 20% of its gross domestic product (GDP).

The European Commission’s president, Ursula Von der Leyen, states that the bloc would target Russia’s energy sector by preventing European companies from providing Russia with the technology needed to upgrade its refineries. The US Department of Treasury has committed itself to prevent Russia’s state-owned Gazprom from raising money to fund its projects in the US. It is worth noting that Russia and Ukraine’s imports and exports to the US account for less than 1%, while Europe and Russia are interdependent. The EU needs Russian gas, while Russia needs the EU’s money. Some warn that the EU’s decision could be detrimental as it receives over a third of its natural gas from Russia. This is used for home heating and energy generation. These fears were intensified when the natural gas price in Europe increased by 62% on 24 February. It is believed that Russia has been preparing for economic isolation for years and that it could better absorb the sanctions than Europe’s ability to reduce its dependence on Russia’s oil, gas, and coal. Despite all these, Gazprom announced that its gas exports to Europe were continuing as normal.

While the world watches with bated breath as the conflict rages there are some promising signs. Russian and Ukrainian delegates are currently meeting on the border with Belarus to start a dialogue and Ukraine’s President Volodymyr Zelenskyy has called on Israel to serve as a mediator between himself and Russian President Vladimir Putin. Let us pray that reason prevails.

News Archive

UFS to award honorary doctorate to Maria Ramos

2004-12-08

The Council of the University of the Free State (UFS) recently approved the awarding of an honorary doctorate to Ms Maria Ramos, Group Chief Executive of Transnet in April 2005. A total of five honorary doctorandi will be honored.

The other doctorandi are Proff Jan Groenewald (D Sc (hc)), Jaap Durand (D Phil (hc)), Sampie Terreblanche (C Dom (hc)) and Anthon Heyns (MD (hc)).

Me Ramos will receive an honorary doctorate in Economics (P hD (Economics) (hc)) for the large contribution she made to the establishment of a prudent fiscal and macro-economic policy in South Africa and hence, to the restoration of the financial credibility of the country in the eyes of domestic and foreign investors. Ms Ramos was the Director General of the National Treasury from 1996-2003.

She obtained the MSc-degree in Economics in 1992 from the University of London and was awarded a British Council Scholarship (Helen Suzman award) in the same year and in 1991. During the early nineties she was among others project leader of the ANC’s Macro-economic Research Group and also a member of the team that negotiated chapters on finance in the interim Constitution of South Africa. She was a research associate at the Centre for the Study of the South African Economy and International Finance at the London School of Economics and also lectured at the Universities of South Africa and the Witwatersrand.

“It is a great privilege for us to honor Ms Ramos and the other doctorandi in their different fields of expertise. This once again serves as an example of the UFS’s policy to give recognition to people who excel and make a difference,” said Prof Frederick Fourie, Rector and Vice-Chancellor of the UFS.

Prof Jan Groenewald will receive an honorary doctorate for his life-long commitment to the establishment and development of Agricultural Economics as a subject field in South Africa and in Africa and his various contributions to the UFS. During his career, Prof Groenewald received various awards among others in 1998 when he received the Stals Prize for Economics from the South African Academy for Science and Art and in 1990 when he received an honorary medal from the South African Society for Agricultural Economics.

Prof Jaap Durand will receive an honorary doctorate in Philosophy for his pioneering work on various fields in the South African society. He obtained his Masters degree in Philosophy from the UFS and contributed to almost 60 articles and collections. Prof Durand has a colourful career as academic manager: from professor in Systematic Theology and dean of the Faculty of Theology at the University of the Western Cape to Deputy Vice-Chancellor of the same university. He was the ombudsman of the University of Stellenbosch from 2002-2003.

Prof Sampie Terreblanche will receive an honorary doctorate in Economics for the important role he played, and is still playing, to keep the debate about and the need for socio-economic and socio-political reform in South Africa going. Prof Terreblanche started his career as a lecturer at the UFS. In 1992 the Stals Prize for Economics was awarded to him by the South African Academy for Science and Art. Prof Terreblanche was also a founding member of ASSET, an organisation addressing the problems of poverty, inequality and social injustice in South Africa.

Prof Anthon Heyns, Chief Executive Officer of the South African National Blood Service, will receive an honorary doctorate in Medicine. Prof Heyns is a well-known international researcher in Hematology and recently received a Centenary Medal from the UFS for his strong role and national prominence as expert and leading figure in establishing and developing Hematology at the UFS. He was the first head of the UFS’s Department of Hematology and is also co-editor of the only Afrikaans hand book of Hematology. He serves among others as a council member and member of the executive management of the South African Medical Research Council. On the international front he serves on at least five committees of the World Health Organisation based in Geneve, Switzerland. He has two honorary appointments as professor respectively at the UFS and University of the Witwatersrand.

Media release
Issued by: Lacea Loader
Media Representative
Tel: (051) 401-2584
Cell: 083 645 2454
E-mail: loaderl.stg@mail.uovs.ac.za
8 December 2004

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