Russia Guilty of Driving the World towards Recession and Food Crisis

What is very clear is that Russia started the war and not Ukraine. Today, the war is taking place on the land and airspace of Ukraine and not that of Russia.
 

by N.S.Venkataraman 

Russia started the Ukraine war,  blaming Ukraine for it’s proposal to join NATO, which according to Russia would pose  security threat for Russia. Subsequently,  even though Ukraine said  that it would not join NATO and  NATO also confirmed that it has no proposal to admit Ukraine, Russia did not stop the war.

On February,24, Russia sent it’s troops to Ukraine under the guise of protecting the Russian speaking population there , especially in the breakaway regions of Luhansk and Donetsk. Russia recognised the independence of the separatist republics shortly before launching the military action on Ukraine. 

What is very clear is that Russia started the war and not Ukraine . Today, the war is taking place on the land   and airspace of Ukraine and not  that of Russia. Ukraine is only defending  its territory and Russia is clearly the aggressor. Therefore, the war has to be stopped by Russia and if the war were to continue , Russia is solely and fully responsible for the consequences such as global recession and food crisis.

While it  is not clear as to what is the ultimate objective  of Russia in conducting this brutal and ruthless attack on Ukraine  , the ground reality is that Russia has significantly disturbed the global economy and forced several countries,  particularly  the small countries with weak economy , into a  state of severe crisis

World cannot be without supply of essentials from Russia :

Russia is a dominant supplier of energy ( crude oil and natural gas) , wheat, fertilisers and several other products to the world. Therefore, the world is bound to get into a scenario of supply and economic crisis , if Russia were to stop the supply of essentials to the world market. 

Energy supply :

Russia holds 80,000,000,000 barrels of proven oil reserves ranking 8th in the world and accounting for about 4.8% of the world's total oil reserves of 1,650,585,140,000 barrels. Russia has proven  oil reserves equivalent to 60.4 times its annual consumption. Russia is the world’s third largest oil producer behind the United States and Saudi Arabia.   Russia  is the second largest crude oil exporter behind Saudi Arabia. Russian crude and condensate output  is around  10.5 million barrels per day (bpd), making up around 12% of the world's total supply

Russia remains the second largest natural gas producer in the world , accounting for 17% of the  global output.

Russia has oil and gas production facilities throughout the country, but the bulk of its fields are concentrated in western and eastern Siberia.

Agricultural commodity supply  :

Russia is  an  important producer of agricultural commodities in the world. Russia  is  a net exporter  of agricultural products, and play leading supply role in  the global market of foodstuffs and fertilisers,  Russia is ranked amongst the top  global exporter of wheat, maize, rapeseed, sunflower seeds and sunflower oil.

Russia is one of the world’s largest wheat exporters.  The country’s 2022 wheat crop , which is due to arrive  this summer,  is expected to reach 85 million tonnes. Russia has the potential to export  39 million  tonnes of wheat  in 2022-23 marketing season, which starts in July.   Exports from Russia are crucial for the  global wheat supply and demand balance.

Fertiliser supply :

Russia produces 50 million tonnes of fertilizers annually accounting for 13 per cent of the world's total output  including  potash, phosphate, and nitrogen-containing fertilizers, all of which are major crop and soil nutrients.  Russia is the world's largest exporter of fertilizers, accounting for 23% of ammonia exports, 14% of urea export, 10% of processed phosphate exports, and 21% of potash export.

Metal supply :

Most Russian metals production is exported.. Its market share of total global exports of nickel is estimated at around 49% – palladium: 42%, diamond: 33%, aluminum: 26%, platinum: 13%, steel: 7% and copper: 4%.   Russia accounts for only 4.4% of cobalt production, but despite this seemingly small share, it makes Russia the world's second largest producer of cobalt.

Russia cripples supply from Ukraine to the world :

Violating   the sovereignty of a neighbouring country, Russia has attacked Ukraine relentlessly, killing thousands of innocent citizens , destroying tens of thousands of   infrastructure facilities including port facilities   and other vital installations.  As a result, Ukraine has incurred more than half a trillion of dollars in losses.

Russia has crippled  the Azovstal Steel Works in Ukraine  for all practical purposes , which is  the largest producer of metallurgical facilities  in Europe producing 4 million tonnes of crude steel annually.

 Ukraine is ranked amongst the top  global exporters of wheat, maize, rapeseed, and sunflower oil.  Ukraine is the most  important producer of several inputs like neon to the world and  the neon facility in Ukraine  has now  been forced to stop  operations   during the war.

As  the supply source from Ukraine has considerably dropped now due to aggressive war by Russia , the world has become vulnerable to  shocks and volatility of supply and price of vital agricultural commodities, fertilisers   etc.  The significant drop in supply from Ukraine of such   agricultural essential commodities has resulted in food crisis in the world.

NATO’s compulsive need to contain Russia:-

NATO has thirty members in Europe and NATO claims that it is essentially a defensive arrangement for security.

Alarmed by Russia’s aggressive postures in Ukraine , NATO countries now feel insecure  and think that Russia can repeat its Ukraine adventure on the NATO members also.

 In such circumstances, NATO has decided that Russia’s aggression has to be contained  and the  NATO members  clearly know that a military war against Russia is not an option for them.  Therefore, NATO has imposed severe economic and sweeping sanctions against  Russia  to control Russia   and force it to  stop its aggressive action against Ukraine and possibly other NATO countries.

Recession and impending food crisis :  Russia responsible

Sanctions against Russia by NATO and USA has now proved to be a double edged weapon

Russia is Europe's biggest oil supplier.   30% of the EU's petroleum oil import and 39% of total gas import come from Russia. For Estonia, Poland, Slovakia and Finland, more than 75% of their import of petroleum oils come from Russia.

Considering the high level of dependency for energy requirements on Russia, NATO members have  now realised that they have no immediate alternative other than buying oil and gas from Russia. While some steps have been taken by  NATO members to shift the source of procurement of crude oil to  middle east or other regions to some extent, this option is not available with regard to natural gas . In such circumstances, the economic embargo on Russia by NATO members and USA are   not  making much impact on Russia’s economy as of now..

In April 2022, Russia supplied 45% of  the EU's gas import, earning $900 million a day. In the first two months after Russia invaded Ukraine, Russia earned $66.5 billion from fossil fuel exports, and the EU accounted for 71% of that trade.

Now, Russia is insisting that NATO members should pay for crude oil and natural gas in Russian currency roubles and several NATO members are succumbing to this  pressure.

The energy war between Russia and NATO members are continuing with really no perceptible change in demand supply scenario and transaction between Russia  and NATO members so far.

An invasion into  Ukraine by Russian troops on 24 February 2022 has as of yet not resulted in a loss of oil  and   gas supply to the market.

Price for crude oil nevertheless surged to   around USD 110 per barrel  following the expectations in the trade and speculative market that sanctions against Russia would cripple energy exports. It is currently unclear what the impact of sanctions will be on energy flows and if any  supply losses will really happen

In the case of the agricultural commodity, Russia,  which competes mainly with  the European Union and Ukraine for wheat supplies to the Middle East  and Africa, has been limiting its   grain exports  with taxes  and an export  quota since 2021 amid efforts to slow  domestic food inflation.

Real shortfall in supply  is happening as  Ukraine has been hit hard by Russian forces, curtailing the export of wheat, gas and several other essential  agri and non agri  commodities from Ukraine.  For example, India has been importing about 19 million litre of  sunflower oil  from Ukraine , which has now stopped  ,causing  severe supply constraint  in India for sunflower oil.

Under the circumstances, the recession trend in the world and the impending food crisis can be avoided only if Russia would stop attacking Ukraine.

This war against Ukraine  by Russia is justifiably condemned by most countries in the world but Russia does not seem to care about world opinion.

Obviously, Russian leadership assumes  that Russia  is a super power as far as energy and agi products and military strength  , fertilisers and several metals are concerned  and under no circumstances, the world can live without supplies from Russia.

In other words, Russia is guilty of causing global recession and food crisis, creating enormous problems for countries that are import dependent for crude oil, natural gas and agri commodities such as wheat,  fertilisers, essential  oil  etc.