HOW INDIA WILL BE HIT

RUSSIA'S INVASION OF UKRAINE SENDS WORLD ECONOMIES INTO A TIZZY. THE INTENSITY OF THE IMPACT WILL DEPEND ON HOW PROTRACTED THE CRISIS IS

- M.G. ARUN & SHWWETA PUNJ RAFIQ MAQBOO

On February 28, after the first round of ceasefire talks between Ukraine and Russia failed, satellites revealed a 64 km-long convoy of Russian vehicles heading toward Ukraine’s capital, Kyiv. News anchors described the scene as reminiscent of Europe during World War II, except that it was unfolding on millions of screens around the world in living colour. The death and devastation of WWII resulted in a new world order, as countries rebuilt their economies after the smoke cleared. A week into Russia’s invasion of Ukraine, rumblings of a huge economic shake-up are being felt again, this time across a hugely interconnected globe with countries just limping out of yet another wave of the devastating pandemic. The economic consequences of Russia’s invasion have been immediate, with crude oil now at its most expensive in eight years and global financial markets and trade reeling. The Indian economy, just barely back on its feet after a third bout with Covid, faces a difficult future.

Broadly, there are two aspects to the economic fallout of Russian aggression. The first is the direct repercussions, a major part of which stems from elevated oil prices. Russia is the world’s third-largest producer and exporter of oil (after the US and Saudi Arabia), meeting 10 per cent of global demand. It is especially crucial in Europe, supplying 27 per cent of the oil and 40 per cent of the natural gas the region needs. In 2020, it exported some $66 billion (Rs 5 lakh crore) worth of fuels to the European Union (EU) alone, and it is a major player in OPEC+, which determines global oil prices. In the early days of the crisis, the price of Brent crude cleared $100 (Rs 7,580) per barrel, hitting $112.6 (Rs 8,535) on March 3. Some say it could touch $125 (Rs 9,475) if the crisis deepens.