Russia’s war in Ukraine wreaks havoc on economic supply chain

Russian President Vladimir Putin restricts fertilizers to the rest of the world. Photo/PA

Beer. Bread. Microchips. Canapes. These are the first telltale signs of impending economic carnage unleashed by Russian President Vladimir Putin’s war in Ukraine.

Things weren’t great to begin with.

Since the start of the Covid-19 pandemic two years ago, global supply networks have been severely disrupted. Factories were closed. Ships were stuck in long queues to unload their cargo. The supply of primary resources has been slowed down.

Now, just as the global economy has begun to recover, Putin has put the brakes on work.

The crippling semiconductor supply crisis is deepening. That means it will take even longer for everything from new cars to game consoles to hit stores.

Household items such as sofas, flatbed furniture and white goods are stuck in shipping queues – if the factories that make them stay open.

Mineral supplies like aluminum are stuffy. This means brewers struggle to secure enough to can their beer. And global grain shortages mean the wheat needed to make this beer is also more expensive.

Map of ships waiting outside the Port of Shanghai.  Photo / Marine traffic
Map of ships waiting outside the Port of Shanghai. Photo / Marine traffic

Such price shocks are for the lucky ones.

Some nations face an impending food emergency. Global food production and distribution networks are grappling with the pressures of extreme weather, pandemic shutdowns and military blockade.

It’s a “perfect storm” of converging crises, says Chicago Council on Global Affairs analyst Ertharin Cousin. “This could lead to a cataclysmic spike in food prices.”

“Reduced crops and scarcer fertilizers promise only hunger and hardship for tens of millions of people,” warn international affairs analysts at Foreign Policy.

hunger games

Two months of war paralyzed Russian and Ukrainian exports.

But. Sunflower oil. Both are major global suppliers of these staple foods.

On top of that, they produce around 30% of all wheat exported.

Pandemic-related supply chain disruptions have seen world grain prices rise steadily for more than a year. But it jumped more than 25% when Russian tanks stormed Ukraine’s border crossings.

With approximately 400,000 km2 of agricultural land, Ukraine has been dubbed the breadbasket of Europe.  Photo/Getty
With approximately 400,000 km2 of agricultural land, Ukraine has been dubbed the breadbasket of Europe. Photo/Getty

Some 1.25 million tonnes of grain are stuck in the holds of ships stuck in Ukrainian ports. Since February, more than 57 bulk carriers – and 1,000 crew members – have been trapped.

This grain is likely to start spoiling by the end of May.

“They certainly didn’t plan to keep this grain on the ships for a long time,” Ukraine’s Agriculture Minister Mykola Solskyi told local media.

Today, the Ukrainian railway network was also attacked. This means that moving this vital food resource to its markets across Europe is no longer an option. And that’s even though Ukraine has lifted its export bans: it needs food for itself.

But 26 countries are heavily dependent on Russian and Ukrainian wheat exports. And alternative sources are not readily available.

Such shortages could lead to “major socio-economic earthquakes in the Greater Middle East and parts of Africa”, warns Jamestown Foundation policy analyst Dr Sergey Sukhankin.

Now Putin has imposed his own embargo on the world – ordering his fertilizer factories to limit exports. His country is the world’s largest producer.

The international think tank Environmental Defense Fund (EDF) warns that the emerging global food crisis is a glimpse of the world’s future.

“The war in Ukraine is a wake-up call,” said Amanda Leland, EDF’s chief executive.

“That’s what happens when you disrupt the global food system – and that’s exactly what climate change does, except on an even larger scale, with lasting consequences.”

Heat waves, storms, fires and floods had already put the world in a precarious position, she said. Putin’s war has just pushed him over the edge.

food for thought

Putin is convinced that fertilizers are a powerful economic weapon. He told Russian media that “the West will continue to buy them… No one wants to starve.”

The United States classifies fertilizer as an essential resource. It is therefore not subject to sanctions.

The EU has imposed quotas. But it still needs Russian supplies to meet demand.

And the Russian president knows that higher fertilizer prices will be a vital boost to his sanctions-starved economy.

It’s a deadly game.

The combined shortage of fuel and fertilizer “is going to have an impact on all production in the world”, says David Laborde, an analyst at the International Food Policy Research Institute (IFPRI). “It’s not just wheat.”

And today’s turmoil is bound to bring a tsunami of trouble into the next planting season, guaranteeing high prices and supply shortages for months to come.

“Fertilizer supply problems could generate severe food crises and catastrophic famines in states like Afghanistan, Yemen and Syria,” said Dr. Sergey Sukhankin, adviser at Gulf State Analytics. “Some experts say that if the situation worsens, the Greater Middle East could see events similar to the Arab Spring of 2010-2011.”

This is, at least according to Russian media, the intention.

“Russia hopes that [fertiliser sanctions] will lead to a global food crisis, mass starvation and socio-economic upheaval in the less developed world, thus forcing developed countries to adopt a more cooperative approach towards Russia,” Dr Sukhankin said.

It is a crisis that could spread throughout the world.

“People will react when they’re hungry … when the cost of food goes up so much they can’t afford the rent,” Chicago Council analyst Catherine Bertini told Foreign Policy.

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