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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

Dr Khotso Mokhele joins ranks of distinguished Chancellors

2010-11-21

Attending the inauguration ceremony are, from the left: Mr Pule Makgoe, MEC for Education in the Free State and member of the UFS Council; Judge Ian van der Merwe, Chairperson of the UFS Council; Dr Khotso Mokhele, newly inaugurated Chancellor of the UFS; and Prof. Jonathan Jansen, Vice-Chancellor and Rector of the UFS.
Photo: Dries Myburgh

Dr Khotso Mokhele joined the ranks of distinguished Chancellors of the University of the Free State (UFS) with his inauguration as the new Chancellor of the institution at a ceremony on Friday, 19 November 2010.

The lustrous ceremony took place on the Main Campus in Bloemfontein and was attended by hundreds of guests from all over South Africa.

Dr Mokhele said in his speech: “I am excited to have been invited by the UFS to join its community at the time when it is attempting to reinvent itself into an institution that will be counted amongst those that will shape the local, regional, national will, and by so doing, contribute to the shaping of an African will.”

Dr Mokhele follows in the footsteps of Dr Franklin Sonn, former Ambassador of South Africa in the United States of America and receiver of many awards, acknowledgements, and honorary doctorates, who retired earlier this year. Dr Sonn was preceded by Ms Winkie Direko, former premier of the Free State.

His acceptance of the role of Chancellor is a great honour for the UFS.

According to Prof. Jonathan Jansen, Vice-Chancellor and Rector of the UFS, it is a proud moment to welcome someone from the Province as the Chancellor of this university. With his strong academic values and deep sense of human compassion, Dr Mokhele is one of but a few uncompromising leaders. He is also an inspiring, determined pioneer and a role model to all our students.

Few have done as much to guide the development of science in South Africa since democracy in 1994 as Dr Mokhele. His vision and actions as a senior science manager have been guided by his deep conviction that for a truly democratic society to emerge in South Africa all people must be empowered to be its architects and must have unhindered access to those careers upon which our economy is built.

Dr Khotso Mokhele was born and raised in Bloemfontein. After matriculating from the Moroka High School he went on to study at Fort Hare, where he graduated with a B.Sc. in Agriculture, winning the Massey-Ferguson award for the best student in that field. As a recipient of the prestigious Fulbright-Hays Scholarship, he entered the University of California in Davis where he took a M.Sc. and a Ph.D. degree, both in Microbiology. He was awarded post-doctoral fellowships at the Johns Hopkins University School of Medicine in Baltimore, Maryland, and at the University of Pennsylvania, Philadelphia.

Dr Mokhele returned to South Africa in 1987, set on becoming a top-class academic and researcher. He held lecturing posts at the Universities of Fort Hare (1987-1989) and Cape Town (1990-1992). In 1992 he joined the Foundation for Research Development (FRD) as one of its Vice-Presidents. He succeeded to its presidency in 1996 and then from 1999 to 2006 became the first President of the National Research Foundation (NRF). He successfully merged the FRD and the Centre for Science Development of the Human Sciences Research Council. Under his visionary leadership the NRF has come to play a pivotal role in the development agenda of the country. He was also instrumental in the establishment of the South African Academy of Sciences serving as its founder president (1996-1998).

Dr Khotso Mokhele's contribution to science in South Africa has received wide recognition locally and abroad. He has received nine honorary doctorates. He was made a Chevalier of the Legion of Honour by the President of France in recognition of his personal efforts in strengthening scientific ties between France and South Africa, and was appointed a director of the Salzburg Seminar, an institution focused on global change, and subsequently a member of its Council of Senior Fellows.

He also serves on the boards of major companies such as Implats, Adcock Ingram and Afrox.

Complete speech (Pdf)

Media Release
Issued by: Lacea Loader
Director: Strategic Communication (actg)
Tel: 051 401 2584
Cell: 083 645 2454
E-mail: loaderl@ufs.ac.za19 November 2010

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