Russia’s war in Ukraine is already taking a dramatic toll on the world economy, placing a huge part of the world’s population, especially those in developing countries, at an increased risk of harm, the UN warned on Wednesday.
The crisis has caused a “perfect storm” of disruption in global food, energy and financial markets that “threatens to negatively affect the lives of billions of people around the world,” the UN said in a new report.
These systems were already under enormous strain due to the ongoing coronavirus pandemic, as well as climate change and other historical challenges, the report said.
But they have been greatly exacerbated by Russia’s invasion of Ukraine due to the region’s importance as a major exporter of raw materials and the impact of unprecedented sanctions against Moscow, which have brought global markets out of balance.
For example, Russia and Ukraine produce about 30% of the earth’s wheat and barley and supply the majority of the wheat purchased by 36 countries – a list that includes some of the poorest nations on earth, the report said.
Russia was also the world’s largest exporter of natural gas and its second largest exporter of oil before it invaded Ukraine. Russia and Belarus also export about a fifth of the world’s fertilizer.
As a result of the war, food prices at the highest levels ever recorded by the Food and Agriculture Organization of the United Nations, an increase of 34% from this time last year, according to the report.
Crude oil prices, meanwhile, have risen 60% year-on-year and fertilizer prices have more than doubled.
“The impact of the war is global and systemic,” UN Secretary-General Antonio Guterres said at a briefing on the report.
As many as 1.7 billion people are “highly exposed” to the cascading effects of Russia’s war on global food, energy and financial systems, Guterres said. The UN report notes that “of these 1.7 billion people, 553 million are already poor and 215 million are already malnourished.”
The multi-layered crisis has put the world “on the brink of a global debt crisis,” the report said. It cited recent UN research that estimates the war will slow the world economy by a full percentage point of GDP growth.
“Inflation is rising, purchasing power is eroding, gross prospects are shrinking and development is stalling, and in some cases gains are waning. Many developing economies are drowning in debt with bond deals already rising since September last year, leading to increased premiums and exchange rate pressures. , “said Guterres.
“And this sets in motion a potentially vicious circle of inflation and stagnation, the so-called stagflation,” he added.
U.S. Treasury Secretary Janet Yellen expressed many of the same concerns earlier Wednesday morning when she said her department will draw attention to the risk of a rise in the global famine rate.
“The fact that energy supplies are being reduced and energy prices are rising, that Ukraine and Russia account for more than 20% of global food exports, we see skyrocketing prices for wheat and corn,” Yellen said during a conference with the Atlantic Council. a Washington-based think tank focusing on international affairs.
Yellen blamed the combination of the pandemic, disrupted supply chains, fierce demand for raw materials and Russia’s invasion of Ukraine for the ongoing rise in food prices.
One of the main culprits behind the rise in food prices is a global shortage of fertilizers. Russia and Belarus account for about 40% of the world’s exports of potassium chloride, a potassium – rich salt that accounts for much of the world’s fertilizer and agricultural production.
But potassium chloride is currently being targeted by the United States and its allies with economic sanctions, as the Biden administration seeks to isolate Moscow from global markets.
Russia also exported 11% of the world’s urea and 48% of ammonium nitrate, two other important fertilizer components, according to estimates by Morgan Stanley.
“Especially in Europe, which is most vulnerable, I worry about the prospect of recession,” Yellen added. “This will be an urgent issue for us next week to try to think about how we can avert hunger around the world. It really is a serious concern.”
Yellen plans to discuss the worsening food security crisis next week when she meets with representatives of the G-7, G-20, the World Bank and the International Monetary Fund.