Russian invasion impacts on trade and commodities

Russian invasion impacts on trade and commodities

Written by: Will Dart 

With the recent events of the Russian invasion on Ukraine, there has been large changes to Russia’s economy, their forein direct investment, and prices of commodities overall changing the standard of living for Russian citizens.

Since the invasion’s start in late February, there has been a sharp increase in commodity prices and common goods in Russia. Contributing factors such as the halt on trade in the Black Sea and from China has made the supply for goods lower. This has made demand high and prices increase, especially impacting lower class and poor citizens. It has been proven that in a crisis, trade is essential for the well-being of citizens and for businesses to recover from the economic decline. Without supply and trade, economic collapse will happen. Unless Putin decides to end the invasion, which is unlikely, Russia will need to repair its trade relations if they want to see economic recovery. As we look on to the future, it is predicted that  Russia will see increased trade costs and damage to infrastructure as their GDP goes down. Also, according to news.un.org, there will be reduced aggregate demand for the rest of the world towards Russian exports due to uncertainty if their economy will bounce back after the invasion.

Russia’s current trade relationships with foreign countries has recently been generally poor with many western countries backing up Ukraine due to the unprovoked invasion. With that being said, many American businesses have stopped operations in Russia, leading to high prices of common goods. Currently being called the Great Business Retreat, over 400 foegin countries have stopped operations in Russia according to investmentmonitor.ai. A lot of these businesses were part of citizens' everyday lives and commodities. For example, “Microsoft and Apple have ceased all sales, including game consoles and phones, in the country as well” according to abcnews.com. Businesses that closed in Russia span from travel to entertainment to payment services including Ford, Toyota, Clorox, BP, Mcdonald’s, Burger King, Kelloggs, Visa, Mastercard, Paypal, Delta Airlines, United Airlines, Amazon, Apple, Spotify, and TikTok. These lack of services and goods have made the standard of living for many citizens go down. With many businesses closing such as McDonald’s, hundreds of thousands of lower class workers are losing their jobs.

However, the future is uncertain as experts say that Russia actually doesn’t depend on foreign businesses as much as we would think. It is believed that these events will cause more of a social political problem than an economic problem due to the halt of business. This is because FDI (foreign direct investment) is not a large part of Russia’s market. FDI accounts for only 0.63 percent of all of Russia's GDP in 2020 with similar statistics now. The United States doesn't even meet the top 10 of countries that invest the most in Russia, meaning that these halts of American business over in Russia will not impact the economy as much as the intended purpose of the Great Business Retreat was initially.

However, lots of citizens are losing their jobs and the price for commodities for the public is rising, causing social political issues against the invasion. How this will play out will only be determined by the future.

Works Cited

Messenger, Haley, and Noah Sheidlower. “Which Companies Have Stopped Doing Business with Russia?” NBCNews.com, NBCUniversal News Group, 16 Mar. 2022, https://www.nbcnews.com/business/business-news/companies-stopped-business-russia-rcna19006. 

Shehadi, Sebastian, et al. “Opinion: Companies Leaving Russia Will Not Have a Huge Economic Impact.” Investment Monitor, 24 Mar. 2022, https://www.investmentmonitor.ai/special-focus/ukraine-crisis/russia-economy-departing-companies-invasion. 

“Ukraine Conflict Putting Global Trade Recovery at Risk: WTO | | UN News.” United Nations, United Nations, 12 Apr. 2022, https://news.un.org/en/story/2022/04/1116052.