Ukraine, Russia and the rest of the world paying for Putin’s invasion

The cost of Russia’s invasion can’t just be counted in devastation and lives lost on both sides in Ukraine – it has had global impact. Here’s a rundown.

The cost of Russia’s invasion can’t just be counted in devastation and lives lost on both sides in Ukraine – it has had catastrophic impact, with the victim, aggressor and global community all suffering.

As well as the troops, tanks and equipment lost, Russia has taken a massive hit to its reputation, with many countries condemning its actions and some labelling its president, Vladimir Putin, a war criminal.

Western sanctions have paralysed the Russian banking sector and financial system, with rouble collapsing.

Those opposing the invasion are also working to freeze $300 billion of Russia’s foreign currency reserves held abroad.

Russia now faces the risk of defaulting on debt for the first time in decades.

Moscow paid interest on two dollar-denominated bonds last week, giving the government some breathing room until the next debt payments in the coming weeks, AFP reports.

But Russia can’t bet on having the funds by then.

Its stock exchange partially opened on Monday after being closed for three weeks.

Firefighters put out a blaze after Russian shelling on a warehouse in Mykolaiv. Picture: Ukrainian State Emergency Service/AFP

Hundreds of Western firms have abandoned their Russian operations.

Some have had their hands forced by sanctions, pressure from their governments and customers.

Others are simply seeking to make a stand in the face of the horrors on our television screens.

Putin has threatened to nationalise foreign-owned companies, which would surely have immense, ongoing legal ramifications and would even more severely damage Russia’s reputation in global business.

An important part of the effort to punish Russia has been bans on oil from one of the world’s biggest producers and exporters of fossil fuels.

Among others, the United States and Canada have led the ban, though the European Union has not falling in to line, as some members rely heavily on Russian oil.

The ban has driven up oil and gas prices worldwide – with prices at the pump soaring.

Brent North Sea crude, the international benchmark, stood at around $90 in February. On March 7, it jumped to $139.13, close to a 14-year high, and prices remain highly volatile.

Gas prices have also skyrocketed.
Other commodities massively produced in Russia have soared, AFP reports, including nickel and aluminium. And auto industry supply chains face disruptions as key parts come from Ukraine.

Smoke rises from a Russian tank destroyed by the Ukrainian forces. Picture: AFP

One of the grimmest warnings in the wake of the invasion has come from the United Nations, with chief Antonio Guterres worried there will be a “hurricane of hunger and a meltdown of the global food system”.

Between them, Ukraine and Russia normally produce 30 per cent of global wheat exports.

Ukraine is also the world’s top exporter of sunflower oil and No. 4 for corn.

Clearly the upcoming sowing season in the invaded country has been hugely compromised and the UN’s Food and Agriculture Organisation says the number of undernourished people could increase by eight to 13 million people this year and in 2023.

The war has caused volatility in global stock markets and is likely to complicated the world’s recovery from the Covid-19 pandemic.
The OECD says the conflict could inflict a one-percentage-point hit on global growth.

The IMF is expected to lower its growth forecast for this year from its current figure of 4.4 per cent.

“The entire global economy will feel the effects of the crisis through slower growth, trade disruptions, and steeper inflation, harming especially the poorest and most vulnerable,” the IMF, World Bank and European Bank for Reconstruction and Development (EBRD) warned in a joint statement.

People walk past a painting depicting Russian President Vladimir Putin killing a dove, at Place de la Paix in Lyon, central eastern France. Picture: Jeff Pachoud / AFP

They warned that soaring inflation, rising prices and weak growth could cause economies to stagnate.

“Even if the war stopped today, the consequences of this conflict would be felt for months to come, and that would work through commodity prices,” the EBRD’s chief economist, Beata Javorcik, told AFP.

Then there is the impending immense cost of rebuilding Ukraine, which has been pounded by Russian forces which have left ruins in their wake.

And then there is the damage to Russia’s standing in the world and the confidence firms and nations have in it as a trading partner.

Things could well get worse for Moscow, with US President Joe Biden heading to Europe in an effort to boost Western unity and ramp up even further sanctions.

White House National Security Advisor Jake Sullivan told reporters Biden wanted to “reinforce the incredible unity we built with allies and partners” and that a further package of sanctions would be “rolled out in conjunction with our allies on Thursday.”

He said the package would “focus not just on adding new sanctions but on ensuring that there is joint effort to crack down on evasion on sanctions”.

Originally published as Ukraine, Russia and the rest of the world paying for Putin’s invasion