As Russia’s war on Ukraine is progressing with each passing day, threats to already halted supply chain operations have increased. Ukraine and Russia make a smaller portion of imports from big manufacturers such as Germany or the United States. However, they are the most important suppliers of raw materials in global supply chains.
However, the financial outcomes of an uncalled war which itself is a big threat to the lives of many innocent Ukrainian will unfortunately always be of secondary and minimal importance. When weighed against the ongoing, impending humanitarian calamity. Here are five important areas that could have problems in the near future.
1. Dependence on Russian energy resources:
Numerous European states are dependent on Russian energy resources, especially for their gas pipeline supplies and this almost reverted their approach after the Ukraine-Russian war. Russian global gas supply is the major reason why most of the European powers couldn’t eliminate Russia entirely from their international payment system which is widely known as SWIFT. However, it is worth noticing that Germans have largely halted construction of the Nord Stream new Baltic proposed pipeline.
2. Smaller disruptions with significant effects:
There are very fewer chances that Russian gas supplies will be completely blocked in the present day and date but even the tiniest amount of smaller disruptions and blockades may exert a significant and major impact on the global gas supply crisis. It is already known globally that worldwide gas storage and reserves are pretty much low since the pandemic began and with that costing and pricing of gas are rising continuously which is directly impacting consumers. Gas is a fundamental part of numerous supply chains globally and any smaller disruption will impart major and harsh consequences overall. At the beginning of 2021, when gas prices were raised the United States had to shut down its fertilizer plants due to high energy production demand but the owners were unable to meet it since the normal pricing of gas was way too high. This eventually resulted in a shortage of carbon dioxide which is fundamentally important to keep the food fresh and for many medical procedures. These consequences were bound to happen with rising oil and gas rates.
3. Global food supply:
As the pandemic accelerated in earlier 2021, general food costs and prices also increased largely because of higher energy demands and climatic and atmospheric transitions. Food factory owners came under enormous pressure as the prices shot up. Ukraine and Russia solely comprise more than one-quarter of global wheat imports and exports while Ukraine single-handedly contributes to making up more than half of the global sunflower oil supply. Both of these countries are essential commodities for the global food supply chain. If by any chance harvesting is affected due to the Russian-Ukraine war then chances are that exports will be blocked and importers will suffer to find alternatives for the food supplies. Some states are largely dependent on Russia and Ukraine for grain supplies such as Egypt and Turkey. Almost 80% of Turkey and Egypt’s wheat and grain imports are drawn from Ukraine and Russia collectively. China also imports corn in large amounts from Ukraine. It can also lessen the effects of disruptions in food supplies in other regions of the world. However, Russia itself is the main supplier of fertilizers. And trade tariffs can have their own effects on fertilizer production. On the other hand, we can also expect some trade diversions as China hinted earlier that it may start importing wheat and grains from Russia despite from Ukraine.
4. Effects on transport and shipping:
Global transport and shipping have already been affected badly due to the pandemic and the Russian-Ukraine war can create more problems for global transport. The most likely modes of transportation that can be affected by the war are ocean shipping and rail freight. Since the beginning of 2010, rail freight routes have been smoothly established between Europe and China and currently their 60,000th train completed its journey. Although rail freight is capable enough to carry only a very limited portion of the entire freight between Europe and Asia, it still played a significant role during global transport and shipping disruptions and has been growing gradually since then. Experts in rail freight are optimistic that interruptions will be minimal so that it won’t affect rail transport majorly but at the very moment trains have been rerouted far away from the war area of Ukraine so we cannot predict as of now what the future holds for rail freight transportation. Lithuania is already preparing to manage its rail traffic which will be affected in the future due to the sanctions placed against Russia.
5. Metal production and exports:
Some important metals such as iron, copper and also the nickel are produced globally by Ukraine and Russia. Both of these countries also import and export significant raw materials like palladium, neon and platinum. When global sanctions were placed against Russia, the immediate cost and pricing of these essential raw metals increased drastically. The recent trading price of palladium was around three thousand dollars per ounce but after sanctions in mid-February against Russia, the prices raised about 75% of the total sales. Palladium is essentially used in automotive systems and dental procedures. The two metals namely the nickel and copper are used for manufacturing purposes and their prices also soared sky-high. Russia supplies titanium to the aircraft sectors in the United States and Great Britain and they have signed contracts till 2030. If any disruption occur in the supply of these metals, then we can expect a potential aerospace shortage and increased prices of US products and services.