The world has not had a shortage of wars or invasions. Some economies have flourished in the midst of harsh repercussions of brutal historical events, and one could argue that a handful of nations managed to even thrive after the latest COVID-19 hurdle. Life goes on; however this does not infer the total immunity of states to impactful political decisions. With Russia’s most recent attack on neighboring Ukraine, speculations about the fate of the global economy have been all the rage.
The invasion unleashed a series of shockwaves to supply chains, including oil, natural gas, and gold. Oil, with prices surging over USD 105 – a jump last witnessed in 2014 – may suffer the harshest consequences of this annexation, and will be largely impacted on the global scale, with speculations of Russia’s future plans to depend on China, as its primary trade and financial partner. Also, the United States may resort to Saudi Arabia to attempt to regulate the international oil market and push prices down. Besides the direct effect on the affiliated nations, other countries will also not be spared of the downfall.
This invasion has presented itself as a genuine challenge that will not only affect Russia and Ukraine’s affairs, but rather develop into a worldwide dilemma for several nations’ economies, including, Egypt. With Egypt being the largest wheat importer in the region, and third largest in the world, as well as Russia being a dominant player in wheat productions, prices of these commodities will likely surge. Thus, the threat of inflation may ensue, especially when considering the fact that 80% of Egypt’s wheat supply originated from Russian farms.
Mohamed Youssef, Chairman of D Code, a leading firm specializing in economic and financial analysis, has affirmed the fact that the invasion will not leave global economies unaffected.
“A ripple effect on all commodities’ prices will be observed. There is a panic globally due to expectations of a food crisis occurring from wheat and cooking oil shortages,” he stated, based on Russia’s inevitable impact on wheat, as well as Ukraine being one of the world’s leading sunflower oil producers.
Besides effects on consumer goods, the Egyptian supply of foreign currency will suffer from the invasion’s impact. Due to Egypt owing a portion of its tourism, and Suez Canal revenues to Russian trade transactions, the Russian war will lead to significant losses in foreign currency due to disrupted trade. As the month of Ramadan nears, Youssef maintained the notion that a surge in inflation will indubitably occur, especially due to how the holy month is often accompanied with an increase in demand on consumer goods. The aforementioned ripple effect will push prices upwards, and possibly result in a higher than anticipated inflation rate in Egypt.
However, in response to anxiety-ridden speculations and rumors about the political situation’s possible impact on domestic markets, Egypt’s Prime Minister, Dr. Moustafa Madbouly, has maintained the fact that Egypt has a trustful wheat inventory, equipped with reserves enough for the upcoming 4 months. On top of that, he supported the notion that the state is actively in the process of diversifying its sources of wheat importation, and the country has, in fact, predicted its importation of the crops to drop by 5.3 million tons thanks to a surge in domestic production.
Mohamed Moatemed, CEO of Faragalla Group, one of Egypt’s leading food and drink providers, expressed his concern for the company’s future operations following the aftermath of the attack. With a large portion of Faragalla’s vegetable products being sold to Russian providers, the company owes a large portion of its export revenue from sales to Russia, leaving Faragalla in a compromised position.
“Besides the export revenue that will inevitably take a hit, Russia’s attack on Ukraine will drive oil prices upwards, leaving our transportation costs much higher than before. Plus, entities that have taken the decision to cut ties with Russian trade and transportation, will force us to suspend a large number of exported goods to the country,” explained Moatemed.
With this new obstacle in sight, Faragalla Group, as well as other corporations that are directly or indirectly affiliated with Russia or Ukraine, must search for new alternatives to make up for this loss. Confidence levels across the globe seem to be continuously plummeting as the situation unfolds. It is, however, worthwhile to mention that the current state of global economies does not necessarily owe all its burdens on the recent declaration of Russia’s invasion, but rather is witnessing an increase in tensions, piling up on top of pre-existing strain from surging inflation rates, and collapsed stock prices.
With the overwhelming abundance of social media jokes – and Russia being the butt of all of them – as well as thousands of Internet memes poking fun at the entire situation, people may develop the tendency to feel like conflicts, especially European ones, are other people’s problem, not their own. This feeling of alienated safety may have some truth to a certain degree, but does not infer the complete immunity of foreign individuals from direct impact of Russia’s attack.
Let us be clear here; this is not a call for nationwide panic, nor a vessel to encourage decreased consumer confidence. This is simply a call for awareness. While this event may feel like a foreign affair that is 2,400 km away from the motherland, it is not wise nor advisory to turn a blind eye to the possible detrimental impact on our own economy. Perhaps it is time to set aside the Twitter memes, and start looking out for solutions to potential rising dilemmas.