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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 institute set to contribute to transformation in South Africa

2011-01-23

The UFS launches it's new International Institute for Studies in Race, Reconciliation and Social Justice.
- Photo: Dries and Henco Myburgh

Today (Thursday, 27 January 2011), almost three years after the Reitz affair, the University of the Free State (UFS) is launching its International Institute for Studies in Race, Reconciliation and Social Justice. This international institute will be inaugurated by Archbishop Emeritus Desmond Tutu, Nobel Peace Prize Laureate and Chairperson of the former Truth and Reconciliation Commission, who received an honorary doctorate in Theology from the university earlier today.

According to Mr John Samuel, Interim Director of the institute and former Chief Executive Officer of the Nelson Mandela Foundation, the institute seeks to establish itself as a premier international site for research on race, reconciliation and social justice.

“It is encouraging to see the UFS bringing to the fore such an initiative, which combines a study in race, reconciliation and social justice, all of which are indispensible elements in the process of rebuilding our nation,” said the Deputy President of South Africa, Mr Kgalema Motlanthe, in his message of congratulations to the university.

“I am confident that on the strength of its stature, coupled with its eminent experience as an academic institution, the UFS will further assist our country advance towards a united, non-racial, non-sexism, just and prosperous future.

“I wish the institute well in its arduous but noble task of contributing to the building of a better human society,” he said.

Prof. Jonathan Jansen, Vice-Chancellor and Rector, stated during his official inauguration in 2009 that the university would be an example of a place where reconciliation, forgiveness and social justice would not only be studied, but where it would also be applied in practice. “Students and scholars from across the world will come to the UFS to study the theory and practice about the building of societies across the boundaries of race, as well as religion, gender, disabilities and national origin,” Prof. Jansen said.

The institute is a critical space where engaged scholarship, public discussion, community engagement and teaching are innovatively integrated towards exploring and finding solutions to the complex and challenging work of social transformation in South Africa.

The institute furthermore works towards the realisation of its mission through a multiplicity of approaches and methods, informed by the notion that deep and complex social challenges require courageous and challenging scholarship, supported by innovative organisational forms and institutional arrangements.

Working from the inside to the outside, the institute will firstly serve the needs of the university, its staff and students. Through its research, the institute will endeavour to understand the challenges facing the UFS better, as well as how to address these challenges. For this reason, the concept of the UFS as a “live laboratory” and the use of evidence-based practice remain important for the university.

The institute will also reach out and empower its stakeholder communities through research and ongoing involvement on issues of race, reconciliation and social justice. Furthermore the institution expects to contribute to the creation of national and international networks and dialogue platforms pertaining to race, reconciliation and social justice.

For the first five years, the themes of 1) Values, Faith and Social Justice; 2) Development and Social Cohesion; 3) Teaching and Learning for Social Justice; and 4) Provincial, National, Global Perspectives and Leadership will direct the institute’s work.

The UFS will make a substantial contribution to the pursuit of reconciliation, greater social cohesion and equity in South Africa. The university is thus prepared to continue to engage the difficult, practical and trying work of building a strong, quality institution as it promotes racial healing and addresses the structural imbalances of the past. It is at this nexus that the institute commits to enabling change at the university as well contributing to transformation in South Africa.

Deputy President Kgalema Motlanthe's message of support to the University of the Free State (PDF format)

Media Release
27 January 2011
Issued by: Lacea Loader
Director: Strategic Communication (actg)
Tel: 051 401 2584
Cell: 083 645 2454
E-mail: news@ufs.ac.za

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