Ukraine War Adds to Food, Energy and Financial Insecurity

The war in Ukraine has created worldwide food insecurity, spikes in global energy prices and roiled international markets.

There are 22 million tons of grain that are currently trapped in the ports of Ukraine. The Russian army has blockaded and mined the waterways making it impossible to get the grain out of the war-torn country. The international community has also placed export sanctions on Russian wheat exports.

The two countries combine for over 1/3 of the world’s wheat. Countries in the Middle East and Africa, who depend on importing wheat to feed their people, are scrambling to avoid the instability that comes with food insecurity.

Russia is also the world’s largest fertilizer exporter. The sanctions placed on Russia have imperiled the ability of countries to get enough fertilizer to grow their crops. This has also contributed to rising food costs and shortages.

To make matters worse, energy prices have also risen sharply due to the sanctions and because Russia has cut off exports to nations considered unfriendly to Russia. The European Union (EU) has struggled to replace the energy it formerly imported from Russia and is attempting to ban 90% of oil imports by the end of the year.

As fuel prices rise, transportation costs for goods also increase, which is a major contributor to inflation for consumer goods.

The conflict also is impacting the global economy. Nations are now forced to contend with the possibility of Russia expanding the conflict beyond Ukraine’s border. This has resulted in an increase in defense spending in a majority of the EU. This leaves less capital to invest in areas that spur the economy and creates downward pressures on growth.

The uncertainty created by the war also dampens foreign investment. There is less capital in the international economy which is causing havoc with markets.

The United States is on the verge of a bear market due to all the instability.

The longer the war in Ukraine drags on the more food, energy and international stability are put at risk. It is in everyone’s best interest for hostilities to cease as soon as possible.