Last Friday marked the 100th day since Russia launched its invasion of Ukraine. When the war began, the nature and extent of the impacts to come were unclear. Although Russia hoped to overthrow the Ukrainian government a few days after the invasion, the grand scheme of the war plan seems to have changed / Russia is now pursuing smaller objectives than at the start, as it now seems to be focusing on the region of Donbass, where Russian separatists have been fighting since 2014.
Unfortunately, the high price of Russia’s war against Ukraine is borne by the rest of the world. The economic outlook published this week by the OECD describes the enormous damage caused by the war to global supply chains.
“The conflict is disrupting the distribution of staple foods and energy, fueling higher inflation everywhere and threatening low-income countries in particular. The first emergency is to avoid a food crisis. This may require more international assistance as well as cooperation in shipping and distribution logistics to countries in need,” said Laurence Boone, OECD chief economist.
The bleak outlook in the OECD report coincides with ongoing talks between Russia and Turkey aimed at unblocking Ukrainian grain shipments stuck at Black Sea ports.
Little progress was made in the talks on Wednesday, with Russian Foreign Minister Sergei Lavrov insisting it was Ukraine’s responsibility to clear its Black Sea ports of mines. However, the Kyiv government requires strong security guarantees for shipments to resume. Since the start of the war, Russian ships have blocked Ukraine’s access to the Black Sea, halting maritime grain exports.
“Even if the ports wanted to open soon, it would take some time before ships could enter or leave. Complete clearance of sea mines in port areas would take several months,” said IMO Special Adviser for Maritime Security Peter Adams.
In addition to the food crisis resulting from the Russian blockade in the Black Sea, an impending shortage of microchips awaits us.
Last week, Russia announced that it would limit exports of noble gases such as neon, a key ingredient in the manufacturing process of computer chips, until the end of 2022. Exports of noble gases, which the Russian supplies to Japan and other countries will only be allowed with special state permission until December 31.
“This decision will be an opportunity to reorganize supply chains that have now been broken and build new ones,” Russian Deputy Trade Minister Vasily Shpak told Reuters.
Ukraine, another major supplier of rare gases, had to suspend production at its Mariupol and Odessa plants in March.
Russia’s new directive will definitely stretch chip manufacturing, an industry that has been reeling from the strain of disrupted supply chains since the start of the Covid-19 pandemic.
Meanwhile, Russia has said it will suspend the 1998 deal with Japan that allowed Japanese fishermen to fish near the disputed southern Kuril Islands. This represents retaliation against Japan for joining the EU and US in imposing sanctions on Russia. Japan also agreed this week to step up military cooperation with NATO amid growing instability in Europe and Asia.