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THE IMPACT OF THE RUSSIAN-UKRAINE WAR ON INTERNATIONAL TRADE

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CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Following weeks of international tension and suspicion about Russian President Vladimir Putin's intentions toward Ukrainian President , Russian forces have invaded Ukraine from multiple angles (Poroshenko, 2022). Russia recently recognized the independence of the entire Donbas region in eastern Ukraine, implying at first that Russia's ambitions were limited to the independence of the eastern provinces Poroshenko, (2022). Russia, on the other hand, responded by deploying soldiers into Ukraine from many angles and launching a full-fledged invasion of the nation. Threats to Ukrainian sovereignty by Russia are nothing new, according to Kriesberg (2022). Russia has tried to influence Ukraine's internal and diplomatic policies since the country's foundation. Russia opposes stronger connections between Ukraine and the European Union, and it opposes Ukraine joining NATO outright Kriesberg(2022). Ukraine's ten-year quest for deeper relations with the EU came to a halt in 2014, when Russia invaded Crimea Kriesberg (2022). Russia also backed separatist movements in the eastern provinces of Donetsk and Luhansk, which culminated in nearly a third of the territory proclaiming independence from Ukraine. Greetings, Poroshenko (2022). The separatist factions signed the Minsk Protocol shortly after its formation, with the aid of France and Germany, in order to restore peace to the area and reintegrate the breakaway republics into Ukraine in exchange for local elections and decentralization. Greetings, Poroshenko (2022). The Minsk Protocol's conditions were never met. Putin's aims are clearly clear: he wants to take over Ukraine and keep it under Russian rule indefinitely, preventing it from pursuing stronger economic ties with the EU or joining NATO Poroshenko, (2022). Ukraine will pay a tremendous humanitarian and economic price for Russia's assault. The immediate international reaction has been to tighten current sanctions by restricting Russian persons and businesses' capacity to participate in commercial transactions with the rest of the world. Since its invasion of Crimea in 2014, Russia has been subjected to international sanctions. Travel bans, asset freezes, and limits on imports and exports in different industries have all come from the sanctions imposed by the US, the EU, and other nations Dreger,(2021). Access to U.S. and other foreign financial markets has been severely curtailed for Russian banks and several oil and gas companies. The US has attempted to penalize firms and even warships involved in the construction of gas pipelines in recent years, which has impeded the development of the two new pipelines Russia is building to send gas to Europe Mamonov,(2022).

The European Union obtains its gas from a variety of sources, with pipeline gas from Russia, Norway, and the Netherlands covering the majority of the continent's demands. There is also pipeline supplies from North Africa, as well as some capability for obtaining liquefied natural gas from the worldwide market. Geographical closeness and an extensive pipeline network have left the EU unduly dependent on Russian supplies, with Russia accounting for more than a third of EU gas consumption Mamonov (2022). The EU also imports around a quarter of its oil from Russia, depending on a network of oil pipelines once again. Because of Russia's tense relationship with Ukraine, gas supplies have been disrupted on occasion, most recently in 2006 and 2009 (Tuzova ,2022). In each of these cases, disputes with Ukraine over the payment of gas transit costs were reported as the basis for shutting off supplies, but the European nations at the end of the pipes were the first to be impacted (Stone, 2022). Since then, the EU has worked to enhance its gas security, but it remains significantly reliant on Russia. With long-term contracts in place in global gas markets and regional, pipeline-based supplies, the EU's diversification away from Russia is difficult, if not impossible, in the near term Tuzova (2022). The price of gas in Europe increased in 2021, owing to significant global pricing pressures as economic activity picked up and localized reasons such as a maintenance-related outage in Norway. However, in the latter months of the year, pricing worries were more focused on the flow of Russian gas Tuzova (2022). These fears culminated in December 2021, when Russia temporarily stopped providing gas via one of the key pipelines, causing European gas prices to skyrocket. While this was a short period in which certain pricing aspects of the European gas market, rather than any purposeful stoppage by Russia, are likely to have played a key role in causing this increase, there have been strong signals of decreased flow from Russia during the previous several months Dreger (2021). In recent weeks, the EU has attempted to compensate by boosting LNG imports. Since the invasion began, European gas prices have skyrocketed. The recent spike in gas prices has had a substantial impact on inflation in the euro zone. Mamonov,(2022).

1.2 Statement of the problem

After Russian soldiers invaded Ukraine by air, land, and sea, global financial and energy markets were shaken, leading oil prices to rise and financial instruments to plummer Mamonov,(2022). Given that the utilities sub-basket accounts for 32.6 percent of core inflation, they predict core inflation to rise in the near term, with a negative impact on headline inflation, particularly given the persisting shortage created by contaminated fuel import Tuzova (2022). Similarly, with substantial food imports from Russia, such as wheat, there are fears about food inflation if the tensions persist Tuzova (2022). The war heightened tensions around the globe, from Europe to Asia to Africa, when President Vladimir Putin called his opponents and other world leaders on their bluff and proclaimed a full-scale military campaign in Ukraine Stone (2022). The global economy was also shaken, resulting in unequaled losses for investors throughout worldwide and investment clusters. Stone(2022). The forex and cryptocurrency markets, which operate 24 hours a day, were the first to fall victim to the onslaught. As the world markets sank, bitcoin, the most popular cryptocurrency, dropped nearly 10% in a few of hours, resulting in the liquidation of over $72 million in long bets in the early hours of the day, according to Stone (2022). The total crypto futures position holders lost $242 million because to liquidations, as meme and altcoins fell 10% to 35% in a wild slide Stone (2022). Global stock markets were not spared the carnage, with the Moscow Stock Exchange, as predicted, leading the losers' chart, with almost 50% of capitalization wiped out as a result of asset dumping panic throughout Europe and the rest of the globe Poroshenko (2022). As a result, it is necessary to investigate the effect of the Russian-Ukraine conflict on world commerce.

1.3 Objective of the study

The general objective of the study is the impact of the Russian-Ukraine war on international trade. The specific objectives are as follows:

i. To examine the factors responsible for the Russian - Ukraine war.

ii. To evaluate the impact of the Russian-Ukraine war on European trade.

iii. To investigate the global prospect of the Russian - Ukraine war

1.3 Research Questions

The following questions have been prepared for the study

i. What are the factors responsible for the Russian - Ukraine war?

ii. What is the impact of the Russian-Ukraine war on European trade?

iii. What is the  global prospect of the Russian - Ukraine war?

1.4 Significance of the study

This study will examine the  impact of the Russian-Ukraine war on international trade, hence this study will be significant to the international community as they will  be exposed to the need to improve and find alternative supply to commodities which affect them most.

The study will be significant to the academic community as it will contribute to the existing literature on the impact of Russian- Ukraine war.

1.5 Scope of the study

This study will examine the factors responsible for the Russian - Ukraine war. The study will also evaluate the impact of the Russian-Ukraine war on European trade. Lastly, the study will investigate the global prospect of the Russian - Ukraine war.

1.7 Research Methodology

Research methodology deals with the different ways or methods the researcher applied in order to carry out the research as well as the instrument used for gathering the data. There are several research methodologies appropriate for answering the research questions. The type of research methodology used in this research to gather data and relevant information is the historical research and the study will adopt descriptive method of data collection. This will involve the collection of materials from secondary sources, such as books, journal articles, magazines, internet sources, international and national conference proceedings, published and unpublished articles.

1.8 Organization of the study

The study consisted of five chapters. Chapter one comprised background of the study  and a general introduction to the work. It included statement of problem of the study, highlighted the objectives of the study, the scope within which the research was conducted is also highlighted. An outline of how the work is organized is also detailed in the chapter one. The chapter two of the study reviewed the factors responsible for the Russian - Ukraine war. Chapter three discussed the impact of the Russian-Ukraine war on European trade. Chapter four  the global prospect of the Russian - Ukraine war and the chapter five is a summary of the major findings with recommendations and conclusion to the study.

REFERENCES

Ahn, D. P., & Ludema, R. D. (2020). The sword and the shield: the economics of targeted sanctions. and Dealt with Global Financial Sanctions. CEPR Discussion Paper DP16075.

Dreger, C., Kholodilin, K. A., Ulbricht, D., & Fidrmuc, J. (2021). Between the hammer and the anvil: The impact of  economic sanctions and oil prices on Russia’s ruble. Journal of Comparative Economics, 44(2), 295-308.

Kriesberg, Louis and Dayton, Bruce, W. (2022). “Mediation in Conflicts.”In Constructive Conflicts: From Escalation to Resolution, edited by L. Kriesberg and B. Dayton, 217-247. Rowman & Littlefield

Mamonov, M., Pestova, A., & Ongena, S. (2022). "Crime and Punishment?" How Russian Banks Anticipated European Economic Review, 130, 103587.

Poroshenko, P. (2022), “Presidential Debate: "The Conflict over Ukraine and European Security".Munich Security Conference, available at: https://www.securityconference.de/en/medialibrary/video/presidential-debate-the-conflict-over-ukraine-andeuropean

security/filter/video/?tx_dreipctvmediacenter_mediacenter%5Bvenue%5D=16&cHash=3042b 11bcc2bdaff03c6ec8468699b63

Stone, M. (2022). The Response of Russian security prices to economic sanctions: policy effectiveness and transmission. US Department of State Office, https://2009-2017.state.gov/e/oce/rls/papers/262748.htm.

Tuzova, Y., & Qayum, F. (2022). Global oil glut and sanctions: The impact on Putin’s Russia. Energy Policy,European Economic Review, 130, 103587.


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