Photo by ANTON VAGANOV for Reuters 2022
Many things are behind the mechanical movement of a business and clients worldwide, from rising prices, to even paying simple gas and electricity bills to delivery times for main products, everything counts, especially in this Pandemic period. Many material productions are delayed by lack of personnel and high prices with high-interest rates climbing, making several products and materials to be out of stock.
With the new war upon us, even if your business doesn’t operate in Europe or the Balkans, we will explain why Russia’s attack on Ukraine affects business worldwide or locally.
Gas Prices
Russia is one of the biggest and number 1 manufacturers of natural gas worldwide, delivering 41% of the world’s natural gas. With the Russian invasion and global supply chains compromised, gas exports will have higher prices. This means that from the European Union to the US, natural gas prices will have higher prices for everyone and your bills will be higher. Europe’s gas and especially in the UK, the price for simple domestic bills raised around 38% before Russia’s invasion of Ukraine, this will raise natural gas prices, meaning a high cost to low-income households or small businesses.
Fuel Inflation
Russia is the third-largest producer of oil in the world. Not only Russia is one of the biggest producers of oil and gas in the world, but they also supply globally, in special western companies. In the worst-case scenario, we will expect major disruptions and delays in deliveries creating food shortages and raw materials, high food prices, and high travel fees related to higher gasoline prices and oil prices skyrocketing around 20% more, just because of the attack on Ukraine leading to economic sanctions by many western countries and international trade policy being stopped in support of Ukraine.
Global Economy
The world economy is really led by energy supply. Russia’s invasion of Ukraine has also had a significant impact on the global economy. The conflict has led to sanctions being imposed on Russia by the US and the EU, which have hurt the country’s economy. As a result, foreign investors have pulled their money out of Russia. This has had a knock-on effect on financial markets, as stocks and commodities have become increasingly volatile.
For example, the US Federal Reserve has kept rates low in order to bolster the economy, while the Bank of England has introduced measures such as quantitative easing in an attempt to stimulate growth. These policies have helped to keep the global economy afloat, but they’ve also caused inflation to rise in some countries.
President Joe Biden and the European central bank condemning the attack on Ukraine is leading to international economics and central bankers to deal with this financial turmoil by cutting Russian entities with for example the Swift international payments.
Swift is a network used by banks to send secure messages about transfers of money and other transactions. More than 11,000 financial institutions in nearly 200 countries use this transaction network, making it the backbone of the international financial transfer system, or as to how they call it in the financial markets: the “nuclear weapon” of the financial markets and global economy.
Without Swift, Russian banks will not be able to pay or get paid globally. They will be left out of financial markets.
The Outcome of Russia’s Attack on Global Markets
The outcome is very simple to see. Not only lives will be lost, but global markets will suffer. Businesses everywhere will see the strained supply chains with production stopping for lack of gas supplies or oil prices climbing, gas prices will burst, and food prices and commodity prices will go up really quick globally.
Monetary policies will change between customers and central banks, with high interest rates raising between 30 to 40% in any household or business. Small businesses need to rethink their strategy of buy-sell to support higher energy prices and high inflation.
Conclusion
The attack on Ukraine has far-reaching implications for businesses around the world. Not only could it lead to a global recession, with monetary policy being implicated, but also the unlimited access to certain products will make raising prices. International payments will also be impacted, with companies doing business in Russia or with Russian partners are likely to see their bottom lines heavily reliant. From the US with the Biden administration going through European Union western sanctions and even the Middle East stopping business with their senior fellow Russia, this attack on Ukraine will affect businesses worldwide.
Comment below on how this will affect your business or your household.
