THE RUSSIA-UKRAINE WAR AND GLOBAL INFLATION.
On the 24th of February 2022, Russian
military Invaded Ukraine, a conflict that analyst say could be the largest in
Europe since World war II. The United Stated of America influenced 94 other
countries to cause an emergency United Nations General Assembly February 2022,
one of its kind in the last 40 years. The assembly was intended to call a vote
on a resolution in Condemnation of Russia’s decision to increase readiness in
Nuclear weapons. Majority of the African countries (28/54) voted for the
resolution. Only Eritrea sided with Russia in the vote whereas the rest of the
African countries (17/54) refrained from taking a side. Uganda is one of the 17
countries that voted for neutrality but days after, the head of was seen in a
closed meeting with the Russian ambassador. This engagement caused mixed
reactions on social media and many Ugandans haven taken different sides on the
Russia-Ukraine impasse. Which side you belong to as an individual however
shouldn’t be an issue of fanciful considerations, its largely about
international relations and interests and so analysis of our balance of trade
with all the conflicting parties should come in perspective.
Since the Russia-Ukraine war, different media houses
have been discussing the impact of this conflict on Global and local affairs.
There has been a steady increase in commodity prices for this period that many
people are failing to put in perspective. These most affected products include
fuel (transport), cooking oil, and soap.
Here is a lay man’s account.
It is public information that Russia is the largest
producer of Wheat in the world and Ukraine is the 5th largest. Both
Ukraine and Russia account for 29% of the wheat exports in the world. A source
in the Economist states that Ukraine and Russia contribute 12% of all the
calories produced in the world including corn, soya bean, vegetable oil, sun
flower and barley. Reports indicate that about 2.8million people have flown
these countries and this has a net effect on production in both countries. The
chain of production in both Russia and Ukraine has been disrupted with
inaccessible harvest in Ukraine whereas reports indicate that Russian ships for
exports have been blockaded and others hit by missiles.
Wheat and barley are harvested in January and
February a period in which tensions have been growing between Russian and
Ukraine and break of the real war. Reports indicate that about 800million
people depend on wheat largely in Middle East, Asia and Africa. It is said that
70% of the wheat used in Egypt (the 3rd most populated country in
Africa) is imported from Ukraine and Russia. It is important to note as well most
of these grains are planted in spring which is already on (March, April, May)
and the long the longer the conflict, the long the global spillover effects.
It is common knowledge that Russia is the world’s
largest exporter of oil to global market and the second largest exporter of
crude oil behind Saudi Arabia. Russia producing 12% of the world’s oil and having
its production and supply chain interrupted by the war has a trickledown effect
on the final fuel consumer across the world which explains the hike in the fuel
prices.
Russia is said to be a leading exporter of natural
gas, a key in put in nitrogen fertilizer. Russia is also said to produce 21% of
Potash fertilizer. There implication is that the price of fertilizers has
increased globally due to interruptions in the supply chain. Countries whose
economies are dependent on Agriculture like Brazil, the leading producer of
Coffee, Soya bean and Sugar are experiencing the spillover effect of fertilizer
scarcity. There has been a huge debate on why the prices of Cooking Oil and
Soap are high in Uganda yet we have our Oil Palm gardens. It is important to
note that the productivity of palm oil is largely dependent on fertilizers
which are imported. A net increase in prices of fertilizers directly increases
the final price of cooking oil, and the crude palm oil which is a raw material
for soap production. Take note also that Oil Palm Uganda and BIDCO which would
offset the Oil prices only produce 10% of East African Palm Oil Market. A
shortage in the Oil Seed complex (Vegetable Oil, Sun flower oil) in Russia and
Ukraine directly affects the final consumer in Kyanamukaka. Inflation is likely to stay longer globally
if the Russia-Ukraine conflict stays.
The writer is a member of Buganda Youth Council and
The NOW Generation.
