RUSSIA – UKRAINE CONFLICT – An Analysis from the International Trade Perspective

By BWA Envoy
July 20, 2022
2 Minutes Read

The ongoing conflict has a deep-rooted impact on global trade. It is imperative to note that the very reason for Russia to invade Ukraine may also be to garner an international port and the advantages therein.

The Black Sea Advantage – The Black Sea is a small part of the Mediterranean sea between Europe and Asia. It has a positive water balance and many important ports. Strategically speaking, the black sea comes with a tremendous advantage. Even in subzero-level temperatures, the ports in the Black Sea remain active. Thus, making the Black Sea one of the most sort after coastlines. Russia shares a coastline of only 800 km with the Black Sea whereas Ukraine shares a huge coastline spreading to more than 2700 km. Usurping Ukraine would mean Russia will have access to the long coastline of the Black Sea making international trade easy and cost-effective.

The Commodity Advantage – Ukraine is a globally known exporter of many commodities such as cereals, iron, steel, etc. In 2020 itself, even during the pandemic, Ukraine exported more than 9 billion dollars worth of cereals. Although on a global level, Ukraine is only the 46th exporter, the world does depend on Ukraine for certain commodities. Further, Ukraine has a fair share of the agriculture-based economy, something that Russia considerably lacks.

Trade Partners – It is interesting to note that China is one of its main trade partners of Ukraine. Putin may also view this attack to secure trade relations with China on a deeper level. As of now, the only trade partners that Russia has is because of the oil reserves. Increasing the world’s dependency by adding more goods would work out in Russia’s favour.

The Impact of Sanctions

The global sanctions on Russia resulted in a spike in international oil prices. Since Russia invaded Ukraine, many of the Russian cargos and tankers have been diverted and refused. However, freezing the assets of a major player in international trade dynamics may have multiple effects on the countries dependent on Russian trade.

This, yet, has not deterred countries globally to condemn the Russian invasion. This has harmed the Russian economy. It has become clear that the longer Russia carries on with this invasion, the more costly it would be for the country. Big companies such as Apple, Nike, and shippers such as Maersk have bailed out of the country already.

In conclusion, it is worthwhile to note that although oil prices have spiked, as a commodity, oil production can be started quickly. Cereals, grains, and other such commodities will suffer greatly as these take considerable time. Wheat prices have jumped more than 50% since the invasion. Countries dependent on Russia and Ukraine for such commodities will also pay a heavy price.