The Impacts of The Russia-Ukraine War on The Global Economy

By Esther Fultz

Two years into the COVID-19 pandemic, the world economy is in a shaky place at best.  Supply chain disruptions, high rates of unemployment and increasing inflation are impacting the lives of millions, both throughout the United States and across the world.  Russia’s recent invasion of Ukraine and the ongoing conflict that resulted is only expected to exacerbate these challenges.  Many of these disturbances are already being witnessed, with the obvious example of skyrocketing energy and oil prices.

Just last week, Russia announced a new requirement for the European Union to pay for natural gas in rubles rather than the common currency, euros.  While Russia has reassured trade partners that this change will not take place immediately, Germany and Austria are already taking steps towards gas rationing and other countries have begun preparations as well. Analysts say the move will support the ruble, which declined to under one cent in value following Russia’s invasion but is recovering.

“Within this next year, everybody will be poorer relative to their current economic condition because inflation will negate any wage gains we may get,” said Dr. Jeffrey Haymond, Professor of Economics and Dean of the School of Business Administration at Cedarville University.  “In addition, because of changing trade patterns because of the war in Ukraine and partnership with Russia and China, everything’s going to cost more because we’re transitioning to more expensive ways of production.”

On a global scale, Ukraine has understandably been hit the hardest by the recent conflict.  However, economic challenges have not even begun to be addressed, as they pale in comparison to the humanitarian crises Ukraine is experiencing.

“When security issues exist that are not being met, economic problems are not nearly as important,” Dr. Bert Wheeler, Professor of Economics at Cedarville University, said.  “Given the seemingly wanton destruction of civilian infrastructure and loss of life, the Ukrainian people are not worried about their economy per se.”

Ukraine, which has been called the breadbasket of the world due to its status as one of the world’s largest exporters of wheat, is not expected to be able to plant its crops this spring due to the war.  This is especially significant considering that Russia is also a large wheat exporter.  While data varies depending on the source, according to the American Farm Bureau, it is approximated that together Russia and Ukraine produce 28% of the world’s wheat, meaning this change is likely to have far-reaching implications.

For Russia, the economic consequences of the war are primarily due to sanctions imposed upon the country by trade partners.  However, the value of these sanctions have been questioned, as they tend to have a much stronger impact on the common people of a country rather than wealthy elites.

“We’ve never done sanctions quite like this before and some of them target particular things intended to hurt the Russian oligarchs,” Wheeler said.  “But when you have a whole lot of wealth built up, it’s a huge safety net.  Whether the wealthy and politically connected will actually be impacted by these sanctions only time will tell.”

Also among countries specifically impacted is China, who decided to ally with Russia in the recent conflict.  “Russia has made themselves a stench to the rest of the world,” Haymond said.  “By allying with Russia, China has made a very serious mistake… They’re going to regret this.”

In light of this current alliance, some have predicted a return to a Cold War style demarcation between the First and Second World.  According to Wheeler, this would be very detrimental.

“If Russia and China come out of this only trading with one another and China pulls out of the global economy, it will have huge negative effects across the globe,” said Wheeler.  “I don’t see anything good coming out of that.”

Despite all the negatives, there have been some positive aspects of the war.  Haymond listed one benefit of the situation as reversing controversial energy policies. 

“They’ve already reversed some of what we were going to do, and we’re going to start exporting natural gas,” said Haymond.  “The movement the Biden Administration initiated to try to kill the domestic energy industry is going to fail.”

When asked about a proper response to the current conflict and resulting economic challenges, Haymond and Wheeler agreed that the United States should be doing more.

“In the short term, I would hope some of our charitable dollars would be funneled directly to the people in Ukraine,” Wheeler said.  “For those of us living in the United States, I’m not sure there’s much we can do [to deal with the inflation] other than paying the higher prices and having a good attitude.”

However the United States chooses to get involved, our goal must be to deal with the conflict productively and never to escalate it.

 “There’s a famous work by Robert Axelrod on game theory which explains the best way you can respond when someone attacks you, which is a strategy Axelrod calls tit for tat,” said Haymond.  “That means if you hit me in the shoulder, my response needs to be hitting you in the shoulder.  I shouldn’t club you upside the head because that would be escalating the conflict, but if all I do is politely ask you not to hit me in the shoulder, you’re going to do it again.”

Esther Fultz is a sophomore Social Work major and an Off-Campus and On-Campus writer for Cedars.  She enjoys writing songs, spending time outdoors, drinking coffee, and hanging with friends.