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546. Ukraine War and the Impact to Food and Energy Security

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Russia's invasion of Ukraine has shaken international politics and markets. While the timing of the convergence is uncertain, it is imperative that this war has long-term, structural consequences for the international community. Chatham House, a British think tank, has compiled a report on the food and energy implications of the Ukraine war, which poses a cascading risk of supply disruptions. Here is a summary of the report. 

Both Russia and Ukraine are important players in the international fuel, food, and fertilizer markets. Russia occupies an important position in the world, being the third largest producer and exporter of crude oil, the second largest producer and exporter of natural gas, and the third largest exporter of coal. Russia is also the largest exporter of wheat and the second largest exporter of sunflower oil. Ukraine is equally important to the world food market, ranking first in the world in sunflower oil exports, fourth in maize exports, and fifth in wheat exports. Russia also dominates the fertilizer market and is the world's largest exporter of fertilizers overall, ranking second in the world for nitrogen fertilizers and third for potassium fertilizers.

Before the invasion, demand was already outpacing supply in the fuel, food, and fertilizer markets, and the war in Ukraine is exacerbating a situation that has been already worsened by rising food and fuel prices and related costs of living worldwide since the COVID-19 pandemic.

These food and fuel price increases are a threat to social stability, particularly affecting low-income and vulnerable segments of society in all economies suffering from post-pandemic inflation and fiscal constraints. These crises, combined with the socio-economic and political stresses that are already emerging, could induce cascading risks such as social unrest and conflict in different parts of the world. When combined with price increases due to supply shocks caused by climate change, the risks are even greater.

For national politicians, the priority will be to take measures to mitigate the most pressing crises. However, neglecting long-term goals, especially climate change mitigation, is a bad move that could exacerbate the fragility of existing economic and social systems.

The Russia-Ukraine crisis poses new challenges to the international community, but the cascading risks it amplifies - supply-chain disruptions, market volatility, resource insecurity, displacement of people and geopolitical change - are already a part of the real world under climate change.

Governments need to invest in building the resilience of international economies and societies to shocks on a global scale that have occurred over the past two years, first with the COVID-19 pandemic and now with the Russian war in Ukraine. Governments should not only respond to the current crisis in Ukraine, but also take "no regrets" measures to mitigate market disruptions and geopolitical challenges.


Reference
Tim G. Benton et al. The Ukraine war and threats to food and energy security: Cascading risks from rising prices and supply disruptions. Chatham House.
https://www.chathamhouse.org/sites/default/files/2022-04/2022-04-12-ukr…

Contributor: IIYAMA  Miyuki (Director, Information Program)