The ongoing war between Russia and Ukraine stems from the Russian Federation’s 2014 invasion of Crimea from Ukraine. Following that, Ukraine’s southern and eastern regions declared independence, and militias fighting alongside the Ukrainian army received Russian military support. The Russian leadership was concerned that Ukraine’s EU and NATO membership would complete a western wall of allies by preventing Russia’s access to the Black Sea. Now Russia wants to invade Ukraine’s eastern territory, and Russian troops are stationed on Ukraine’s border, heightening fears of conflict. Russia and Ukraine are the world’s leading suppliers of natural gas, wheat, aluminium, nickel, chemical products, and machinery.As a result, the disruption between these two countries has a significant impact on the global economy.
IF RUSSIA GOES AT WAR WITH UKRAINE, HOW WOULD IT IMPACT THE GLOBAL MARKET?
A military tussle with Russia, is certain to worsen the situation. According to the US Energy Information Administration (US-EIA), Russia produces 12.5 % to 13% of world crude oil, accounting for about 50% of overall crude oil production in the Organization of Petroleum Exporting Countries (OPEC) region in the Middle East (West Asia). Maximum budgetary estimates would render useless if unmanufactured oil prices stay at the current price levels, or situations may get worse and lead to rising of crude oil to much more, as the government faces a trinity of global economic issues on the fiscal, inflation, and global current accounting fronts. Higher the price of energy and by products, obviously , would drive inflation in Europe as well as Global Market much higher than the approximate two-decade high of 5.1 percent already present at Global market levels. Concerned about even high inflation this war stimulate the European Central Bank to create a increase in the interest rates and render its zero-rate policy void, which is being followed by the. European Central Bank since 2014. On the other hand, if bankers at the Global Market Level are exposed to the increased threats relating to economic growth, they may push tightening monetary policy in the near future.
WHAT IS HAPPENING IN THE GLOBAL MARKET?
The newest developments in the Russia-Ukraine situation have been keeping investors glued to the TV screens. Markets have been engulfed by signs of escalation, while wordings suggest that this inevitable war have sparked relief rallies. Uncertainty an Unpredictability is something that investors despise and despair of. It is easy to watch how a full-fledged invasion over Ukraine would stimulate a stock market complete selloff as investors keep worrying about an unpredicted oil shock, hyperinflation, and a jumbled sanction system.
A long-term market slump would wipe out Global wealth in the stock market and retirement plans would tur out to be futile. Consumer and business confidence may be harmed at Global Market as a result of market volatility and unpredictability. Although it is all a stimulation, stocks have a history of recovering and rising from issues that fuel up geopolitical concerns. WOULD THERE BE SLOWER ECONOMIC GROWTH?A conflict between Russia and Ukraine might harm the US economy by raising inflation and increasing uncertainty. According to RSM, a rise in oil prices to $110 would reduce US GDP by 1% point.Although not as substantial and impactful as the impact on inflation this war is not meaningless as it is significant given that the US economy has not yet regained all of the employment lost under Covid-19. This Global Crisis might bring US Economy as well as Global Economy to knees.
HOW WOULD THE WAR IMPACT INDIA?
According to data from the Centre for Monitoring Indian Economy’s (CMIE) database, Russia has been losing prominence in India’s commerce. Russia was a major export avenue for India before the collapse of the Soviet Union or the USSR, accounting for over 10% of India’s total exports. By 2020-21, this figure will have dropped to less than 1%. To be sure, India’s total commerce has grown throughout this time. In 2020-21, Russian imports accounted up 1.4 percent of India’s total imports. While the impact on present commerce may be minor, a conflict and the resulting sanctions might stymie India’s aspirations to expand its economic and investment ties with Russia.”Improving trade and economic cooperation between India and Russia is a top priority for both countries’ political leaders, as evidenced by revised targets of $50 billion in bilateral investment and $30 billion in bilateral trade by 2025,” according to a brief on India-Russia economic relations on the Indian embassy’s website. According to the brief, India’s total trade with Russia in 2020 will be $9.31 billion.
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