The United States and its allies have slapped crippling economic—trade and financial—sanctions on Russia to stop the conflict in Ukraine.
Except for oil and gas, Washington has banned financial and other business transactions with Moscow.
Most global consumer brands, from cars, computers, clothing, and even coffee, soda, and fast-food chains have left the Russian market to put pressure on Vladimir Putin to stop its “special military operation” which the West has described as an unprovoked aggression.
Moscow must be feeling the impact of the economic sanctions but halting trade with Russia would have dire consequences for countries relying on its main export products—oil, gas, and grains and cereals.
Squeezing Moscow could also strangle food supplies in many parts of the world, particularly in the Middle East, Africa, Europe, and Asia.
The war in Ukraine would be entering eight weeks and it has disrupted major economic activities in both Kyiv and Moscow, not only due to intense fighting but also due to economic and political sanctions imposed by the United States, Western Europe, and other key allies like Canada and Japan.
Global crude prices soared immediately after the Russian invasion, reaching close to $140 per barrel before falling back to about $90 to $100 level.
The recent decision of Russia to sell its oil and gas in rubles and peg its currency to gold, or a gram of gold costing 5,000 rubles, will have far-reaching consequences to the American dollar, as it will lose about 30 percent of its value when buying Russian fuel.
Countries dependent on imported crude were immediately hit by high oil prices. It has some domino effect on other industries, like power, transportation, manufacturing, and food production.
In the Philippines, the Duterte administration was forced to grant subsidies to transportation workers as well as to agriculture, including marginalized fishermen catching fish and other marine products in municipal waters.
Fuel prices in the capital region shot up to nearly P80 per liter, causing other basic goods, including prices of processed, canned goods, to move slightly higher.
Fuel and food price adjustments as well as the availability of supply creates a deadly mix, with the world still recovering from the economic downturn caused by lockdowns due to the coronavirus pandemic.
The threat of another coronavirus surge still looms as many countries, including in the Philippines, have lowered their guards as more businesses reopened and as the May presidential election heats up in the homestretch.
The conflict in Eastern Europe has cast a dark cloud on global economic recovery. Ukraine and Russia will not be the only countries that will suffer from the war and the sanctions on Moscow.
Seizing overseas assets, freezing bank accounts, and barring high-level Russian officials and some oligarchs from entering the US and Western European capitals might be good ideas, but wider trade and financial sanctions that could affect Russian citizens would be too harsh.
Why punish the people when it could target only the leaders and the rich people close to them.
For instance, Filipino migrant workers would not be able to transact business and send remittances to family back in the Philippines due to sanctions as global financial institutions, including Visa, have suspended operations.
But the sanctions could have more impact on food security. Both Ukraine and Russia are considered bread baskets in Europe, exporting nearly 12 percent of food calories traded worldwide.
The two countries are top sources of basic agro-commodities, like wheat, corn, and sunflower oil. Russia is the world’s biggest exporter of fertilizers. About one-third of global wheat exports come from Russia and Ukraine.
Ukraine and Russia supply more than 50 percent of cereal imports in the Middle East and North Africa, including Egypt and Morocco. Eastern Africa countries, like Kenya, import 72 percent of their cereals from Russia and 18 percent from Ukraine.
The European Union does not depend on food imports from Russia and Ukraine but producing food would need animal feed and fertilizers, which Russia supplies.
Trading of food products has been disrupted by the conflict and in some ways by sanctions imposed by the United States and its European allies.
The world is facing a serious food security crisis.
The United Nations Food and Agriculture Organization (FAO) estimated that about 720 million to 811 million people worldwide faced chronic hunger in 2020. This might increase by 7.6 million to 13.1 million due to the conflict in Eastern Europe.
Middle East countries, like Israel, Jordan, Yemen, and Lebanon are most at risk as they rely heavily on basic commodities imports, mostly coming from Russia and Ukraine.
The war has disrupted the markets and led to rising costs. Shortages will exacerbate the food crisis.
Unlike the Middle East, African and some Asian countries, the Philippines does not rely too much on Russia and Ukraine for food imports.
Southeast Asian countries, including the Philippines, are lucky not to be dependent on wheat, barley, and corn as rice is the staple food, but the region could not escape rising prices, supply shortages, and a global market disruption in animal feeds and fertilizer.
The food crisis is the real threat due to the conflict in Ukraine. Sanctions could hurt not just the Russians but the entire world due to financial and market disruptions.