The consequences of the war in Ukraine will be far-reaching 

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Nataliya Katser-Buchkovska, Cofounder, Ukrainian Sustainable Fund

• The Russian invasion into Ukraine will have far reaching consequences in a variety of areas: the situation has evolved into a humanitarian crisis, has turned food and energy security volatile and raises questions about the architecture of global security.
• These challenges will not be limited to Ukraine, but due to the globalised world we live in, will pose challenges across the globe.
• Both short- and long-term solutions must be found to ensure these consequences won’t result into castastrophes upon catastrophes.

The Russian invasion into Ukraine was a tipping point for world security, the international economy and our global energy architecture. It is not possible to narrow down a war like this to one region while we live in a globalized world. We cannot keep radiation in one country’s geographical borders, or eliminate one country from the fragility of supply chains.

This new type of hybrid war including its grave humanitarian crisis, the cyber attacks and economic hardships as well as disinformation and propaganda campaigns, geopolitical tensions about energy supply plus the threat of a nuclear war will have far-reaching effects.

Humanitarian impact

According to the United Nations, more than eleven million people have left their homes in Ukraine so far: 5.3 million of which have left to neighbouring countries, while 6.5 million people are now internally displaced in the country itself amidst the continuation of the war. The UN’s children agency believes that two-thirds of all Ukrainian kids have been impacted and have had to flee their homes.

Ukrainians need jobs more than subsidies

Since the war started, half of all Ukrainians have lost their jobs. Only 2% were able to find temporary earnings. It is crucial that investment into re-education and skills development will help improve this situation. Those that have left for other countries are willing to return home once it is safe to do so. In the meantime, if they could invest into their know-how and an increased sense of business culture, they could fuel Ukraine’s economy after the war.

A global food crisis

Ukraine grows enough food to feed 400 million people worlwide, which includes 50% of the world’s sunflower oil supply, 10% of the worldwide grain supply and 13% of global corn supply. As for now, up to 30% of crop areas in Ukraine will either not be planted or be unharvested this year because of the Russian attack. In addition to this, supply chains from Ukraine have been disrupted, because of the closure of the Black Sea ports and limited ability to transport commodities through the Western border.

Because of the war and consequently, city blockades, lack of seeds and fertilizers, farmers are struggling to go ahead with the sowing. If farmers will not start to plant crops now, there will be catastrophic consequences in the fall. The markets have already reacted. Wheat prices soared by almost 25% over the past year. This will result in a supply issue, impacting the availability of food for people around the world.

Due to the current situation, Ukraine is facing a food crisis in several cities, such as Mariupol, with limited to no possibility to bring in more supplies. This food crisis is a part of the bigger economic war that the invasion into Ukraine has triggered. The problem will not be limited to Ukraine, but also hit other Eastern European countries hard, as prices surge in the short-term and shortages will increase in the long run.

This is why small farmers need support now to grow food this season and provide for the country’s domestic needs. For a long-term perspective, green sustainable farming practices need to be established.

Energy challenges

Russia’s invasion of Ukraine has the potential to accelerate the global shift to green energy in the long run, but as for the short-term it will have huge consequences on energy price and market structures. Firstly, countries are working on contingency plans as a response to the shortage of oil and gas. The United States, United Kingdom and Canada imposed an embargo on Russian oil and gas imports. The EU is working on plans to decrease dependence from Russian gas and oil by 2024, too. Other states and big private energy companies, like Shell, BP, Equinor, Exxon are leaving Russia. Markets react with a gas and oil price surge. Security and affordability will play a key role in state policy of energy companies, as the urgency to no longer be dependent on fossil fuels has become more salient through the war in Ukraine and after the release of the IPCC’s latest climate report.

This marks a shift in how we think about energy and where we get it from: the investment into renewables will be considered a component of energy security – and political stability. Therefore, the rapid development of the technologies needed for a green transition would only accelerate this process.

World security architecture must be rethought

The Russian invasion into Ukraine is raising questions about national sovereignty, democracy versus autocracy, human rights and the global world order. This means that whatever its outcome may be, it could mark a turning point for the world’s security infrastructure.

The current security architecture as we know it, established after World War Two, could be overthrown. This could have effects on the global economy, too. UBS clearly states that global markets have become increasingly volatile as investors weigh in on the impact of the war in Ukraine, the potential disruptions to the flow of commodities, and the tightening of global sanctions on Russia.