Hannah Costello examines the effects of the war on Ukraine on the global economy and supply chains.
When Russia invaded Ukraine, those responsible underestimated the catastrophic effects across the globe. While there are many different concerns arising from the Ukraine/Russia war, including the tremendous suffering and loss the Ukrainian people are faced with, its worth focusing some attention on the economic crisis emerging from this war, particularly the effect this war will have and has had on the people in Ireland.
The economic threat across the world is rising; this is partially due to the sanctions imposed on Russia, for example by the United States, banning new investment in Russia; severe sanctions on two Russian financial institutions - Alfa Bank and Sberbank.
The UK has sanctioned Russia’s largest bank, Sberbank, and has committed to ending all Russian coal and oil imports by the end of 2022.
These sanctions that the world has put on Russia, while directly impacting Russia, have indirectly impacted the Wests’ trading partners and the wider world economy. Despite the fact that the rise in energy prices is an inevitable corollary of a major gas and oil producer being in a conflict, not to mention the disruption and insecurities that this war causes. Energy prices, in particular, have hit new highs, and by historical standards, gas prices are particularly affected.
These sanctions that the world has put on Russia, while directly impacting Russia, have indirectly impacted the Wests’ trading partners and the wider world economy.
While Ireland has not directly sanctioned the ending of all imports of Russian Fossil Fuels, the Irish economy has taken a great hit. Electric Ireland announced a rise to 23-25% from May.
The average electricity bill will rise by 23.4% or €24.80 a month, while the average gas bill will rise by 24.8% or €18.35 a month. We will see new gas bills at approximately €220 a year, while the new electricity bill will rise to approximately €300.
Electric Ireland has already increased their prices twice this year in response to the cataclysmic effects of the war on Ukraine. Furthermore, they announced two 10% increases to their electricity tariff in 2021 with the additional two increases ( 9% and 8%) to gas prices.
Energy prices, in particular, have hit new highs, and by historical standards, gas prices are particularly affected.
“We are acutely aware that the rising cost of living is causing difficulty for households across the country,” said Marguerite Sayers, executive director of Electric Ireland, when talking to the Irish Times.
“Unfortunately, the unprecedented and sustained volatility of wholesale gas prices over the last 12 months means that we now need to increase our prices,” she said.
Energia indicated they would increase prices by 15% from April 25th, while Bord Gáis Energy prices from April 15th are expected to go up by 27% for electricity and 39% for gas.
Since October 2020, when prices began to rise, some of the suppliers to Ireland have stated that there will be further price rises, which equates to almost an additional €1,500 for households’ annual gas and electricity bills. This increase in prices means that many have to suffer from choosing between food for a week or heating and gas.
To say that these are extraordinary times for the energy sector is an understatement. It is theorised that more price hikes will come in the following months to compensate for the war at hand.
Although, it should be noted that one of the primary goals of the EU is to reduce the reliance on Russian gas, which (when successful) will have a positive effect on the prices for households’. While fossil fuels are a massive factor that has been affected, that is not to say that other industries have been decimated throughout this war. The imports of wheat, fertiliser, aluminium and other key industrial inputs have been halted from Russia. Not to mention the number of exports from Ukraine to Ireland is diminishing. With the price of groceries on a steady incline, many have questioned whether the food supply to Ireland will diminish as the war continues.
Both Russia and Ukraine are major exporters of essential food sources such as wheat, maise, and sunflower oil; hence the ongoing violence directly affects the supply. Before the war, Ukraine supplied 12% of all wheat stocks and was one of the largest exporters of sunflower oil, a manufacturing staple and used by many households.
Ukraine is one of Ireland’s largest consumers of cereals, iron and steel, meat, machinery, fertilisers, and wood.
This increase in prices means that many have to suffer from choosing between food for a week or heating and gas.
Aside from the food exports, Russia and Ukraine are two of the largest exporters of fertiliser, with Russia supplying Ireland with over $99.18 Million back in 2020, according to Trading Economics.
The fertiliser prices have already risen just below the electric prices. This price hike means a large impact on the agricultural sector in Ireland, which will further impact the supplies to supermarkets. The increase in gas is indirectly affecting the agricultural sector, as farmers rely on diesel for farming equipment, such as tractors. But, again, affecting the food supply to the country.
Fear of what will happen in Ireland should this war expand beyond Ukraine.
Many students here at UCD have different opinions on the effect this war has had on them. Some proclaim their fear of what will happen in Ireland should this war expand beyond Ukraine, given that Ireland has not remained as neutral in this conflict as it did during examples such as the second world war. On the other hand, some say that there’s been a large effect on them as the petrol prices rise, having to re-budget their expenses.
Additionally, other students are concerned about the increase in supermarkets’ prices, especially with the increases in staples such as bread and milk. While the government has told people not to worry about potential food shortages, it is an inevitable factor should this war continue for much longer.