The ripple effect of the Russian-Ukrainian war is costing the global economy dearly
As the Russian-Ukrainian war enters its third week, there is no sign of its end.
Despite three meetings between the Russian and Ukrainian delegations, no substantial breakthrough has been made as bloodshed and human displacement continue. The effect of the war has already shown itself in rising commodity prices globally, especially crude oil and wheat, and there have been logistical disruptions. A gigantic human crisis resulting in the displacement of around two million people from Ukraine is putting pressure on neighboring counties.
India, being the largest democracy in the world, is preoccupied with the stakes of the Russian-Ukrainian war. He is close to both Russia and Ukraine and, as a sympathizer, believes that any dispute between two sovereign nations should be resolved through dialogue rather than war. The Indian Prime Minister held talks with the leaders of the two belligerent countries as well as with neighboring countries such as Hungary. India’s response to the war and the resulting abstention from voting on the UN resolution could be seen as a responsible, neutral and humane stance on the issue. India has made it a point of honor for leaders of warring nations to create a humane corridor for civilians to walk away from war-torn regions with its own students in Ukraine. India has also sent a very strong message as a responsible nation by facilitating students from neighboring Pakistan and Nepal.
India, as the fastest growing economy in the world, is concerned about the economic implications of the war on the global economy, especially Russia, Ukraine and Europe with which India has deep ties. Disruptions to the global commodity supply chain, particularly crude oil, gas and wheat, would not bode well for the nascent global economic recovery from COVID-19. India believes that the two warring countries which share a long common history and culture should open their doors for fruitful dialogue.
Unlike others, India has not taken sides or fallen into the blame game. Although many Western countries accuse Russia of invading a sovereign nation, China in its statements has accused NATO of instigating the Russian-Ukrainian war. The blame game often reduces the chances of finding a solution to a problem. It is obvious that under Russia-Ukraine there is an undeniable semblance of war for hegemony between the superpowers which refreshes the memory of the Cold War.
It is necessary to appreciate Russian concern over the presence of NATO forces in its backyard, but nothing can justify a war. India understands Russia’s concerns, but does not approve of violent methods of resolving issues. The efforts of the United States and its NATO partners to contain a superpower like Russia, even indirectly, alleging that it is an arrogant, autocratic and irresponsible power would only lead to a vicious circle of arguments and counter-arguments and vitiate the situation.
Indications have been given by China, Israel and Turkey for interim talks between the two belligerent countries. But these countries do not command as much confidence as the mediators. While China remains aligned with Russia, however, tacitly Turkey is known to have played both sides – Russia and Western allies.
For Israel, it will be very difficult to prove that it is neutral between Russia and the United States, as it has long been an ally of the latter, especially in the context of geopolitics in the Middle East.
The global economy, which was showing “green shoots” of economic recovery after the recessionary impact of the Covid pandemic, is once again under threat. India fears that the ripple effects of a war of this magnitude, if continued, could undermine the world’s efforts to achieve the Sustainable Development Goals.
The series of sanctions, including debarment from SWIFT, imposed on Russia would not have economic implications for Russia alone, but for all countries, including those in the EU that have close ties with the Russia. Although the sanctions would significantly disrupt Russia’s ability to receive payments for exports and imports and cripple cross-border financial transactions, Russia’s major trading partners, including European countries, would also face difficulties in paying Russian oil and gas imports.
The US President’s recent speech that people should be prepared to pay the price for the cause of democracy as global commodity prices, including crude oil and wheat, hit new highs, is not very reassuring to solve the problem. Inflationary pressure would make life difficult for poor households around the world.
Many Asian economies, including India, import a large part of their energy needs and a sharp spike in crude prices would put immense pressure on their balance of payments. Importantly, as the Indian economy is being treated as a driver of the global economic recovery post Covid, such a spike would weigh heavily on growth and price stability. Nor can China afford to rejoice as the silent winner of Russia’s challenge to the United States and its allies in the game of hegemony. Due to its strategic location, Ukraine is very important for China as a gateway to Europe and the European Union, the war would affect the supply of minerals and agricultural products in both directions. Ukraine is an important hub within the BRI, which Kyiv joined in 2017. Chinese companies working in Ukraine, including Beinkew Energy, Xinjiang communications Construction Group and Weldatlantic Group, would also experience disruptions to their operations.