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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

“Breakthroughs depend on people believing in their own ideas”

2015-07-23

TED is a renowned international non-profit organisation dedicated to disseminating “ideas worth spreading” in the form compelling talks lasting up to 18 minutes.

Lerothodi Molete’s vision is to witness the youth of Bloemfontein emerge at the forefront of technological, scientific, and entrepreneurial innovations in both South Africa and the global arena.

Molete and Bonginkosi Leeuw are the organisers of TEDxUFS. Their duty is centered on inspiring people to believe in, and express, their ideas. These University of the Free State students have taken it upon themselves to inspire the youth to “push the boundaries of society.”

The second TEDxUFS event to be hosted by the university presents a unique opportunity for students, staff members, and the general public to mingle with influential speakers from across various disciplines.

Details of the event:

Date: Saturday 1 August 2015

Time: 08:00- 18:00

Venue: Albert Wessels Auditorium, Bloemfontein Campus

The keynote speakers include: Mmusi Maimane (Federal Leader: Democratic Alliance), Gareth Cliff (Radio personality: Cliff Central), Pieter Geldenhuys (Futurist), Brian Kally (Director: Arrow Logistics), Jonathan Jansen (Vice-Chancellor and Rector: UFS), Ricardo Peach (Director: Vrystaat Arts Festival, Pamela Nomvete (Former actor and writer), Gil Oved (Founder: Creative Counsel), Pepe Marais (CEO: Joe Public), Angelo Mockie (Senior Officer: Student Affairs and musician), Philippa Tumubweinee (Senior Lecturer in Architecture: UFS), and Melody Mentz (Psychology Senior Professor: UFS).

The reason behind the #AskWhy theme

"Why is a small word but it’s a quick, broad, sharp and abrupt one,” explains Leeuw. “It is the chosen word of the non-conformist, the defiant, and the visionary. It is a confrontational word. It challenges what is thought to be impossible.”

The ability to interrogate reality is what society and economies are built on. The absence of the fear to question encourages the capacity to progress.

Motivating young people to follow their dreams is the reason why the TEDxUFS team is persistent in their endeavours. Molete believes that, in order to change anything, people need to ask why.

Background of the innovation powerhouse called TED(x)

TED is a renowned international non-profit organisation dedicated to disseminating “ideas worth spreading” in the form compelling talks lasting up to 18 minutes.

In 1984, it was introduced as a conference exploring Technology, Entertainment, and Design. Three decades later, TED covers a wide variety of topics of global significance, reflecting the contemporary era in more than 100 languages.

TEDx events are under the TED umbrella. These events are organised independently, and create a platform for deliberating on local matters. The programme assists communities, organisations, and individuals to stimulate critical dialogue.

On 25 July 2014, the UFS hosted its inaugural TEDxUFS conference at the Odeion theatre on the Bloemfontein Campus, where eleven speakers addressed an audience of 150 people on interdisciplinary topics ranging from economics to entrepreneurship, technology, art, design, and theology.

This year, 200 seats will be available for innovative revolutionary individuals in search of inspiration.

Tickets are available at 0619284253 / 079 381 4126. Prices: R80 (Student/scholars) and R350 (Public/staff)

LINKS:

Lerothodi Molete- http://whoswho.co.za/lerothodi-molete-742022

Bonginkosi Leeuw- https://www.ted.com/tedx/events/10499

TEDxUFS- http://kovsielife.ufs.ac.za/templates/archive.aspx?news=276

Mmusi Maimane- http://whoswho.co.za/mmusi-maimane-44612

Garett Cliff- http://www.garethcliff.com/

Pieter Geldenhuys- http://pietergeldenhuys.com/

Brian Kally- https://za.linkedin.com/pub/brian-kally/4b/888/959

Jonathan Jansen- http://www.ufs.ac.za/adhoc-pages/rectorate/prof-(jd)-jonathan-jansen

Ricardo Peach- http://ricardopeach.com/

Pamela Nomvete- http://whoswho.co.za/pamela-nomvete-4789

Gil Ovid- https://za.linkedin.com/pub/gil-oved/3/910/892

Pepe Marais- http://joepublic.co.za/people

Angelo Mockie- https://za.linkedin.com/pub/angelo-mockie/27/56/302

PhilippaTumubweinee- http://natagri.ufs.ac.za/templates/staffmember.aspx?DCode=101&pid=zyNJm7KI%2b1k%3d

Melody Mentz- https://za.linkedin.com/in/melodymentz

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