In the modern world, when all countries are closely interacting with each other, such events as war can have a significant impact on the global economy. Even though the Russian invasion has just started, it has already caused a number of economic issues. The major problems include the increasing transportation costs and disruption of the global supply chain. Also, since Russia is considered to have one of the most substantial cyber warfare capabilities, worldwide cyber aggression may become a major economic threat.
In the present moment, the main concern for the global economy is the disruption of supply chains that are caused by Russia engaging in the war. Russian suppliers are distributed all around the globe. More than 2100 the U.S and 1200 European firms have at least one direct supplier from Russia or Ukraine. However, regarding indirect suppliers, the number of affected organizations increases significantly, reaching about 200000 firms in the U.S. and 150000 firms in Europe. Therefore, the indirect impact of the conflict on the global supply chain is profound, which results in soaring prices for various materials and goods.
The war has a significant impact on commodities and materials. Firstly, Russia is the biggest wheat exporter, and Ukraine is among the world’s top exporters of corn. The result of their economic isolation can be a price shock on food in the countries that depend on Russian and Ukrainian exports. Secondly, the invasion impacts the supply of metals and raw materials from these countries, which is a significant threat to some manufacturing companies. For instance, Russia possesses about 10% of the world’s copper reserves, apart from other metals, and Ukraine, according to experts, is a profound supplier of minerals.
In addition, natural gas and oil prices are also spiking, which leads to increased transportation costs and expensive electricity. Since natural gas has become an essential source of energy, the limited supply from Russia can result in financial difficulties for manufacturers and other electricity-dependent facilities. For instance, Germany is highly dependent on natural gas in electricity production and manufacturing, making it vulnerable to a gas shortage. As a result, the export of automobiles, transport equipment, and electronics from Germany is now disrupted. While limited gas supply impedes the world’s manufacturing process, soaring oil prices interfere with global transportation. Being one of the leading oil producers, Russia made many companies paranoid about the worldwide energy supply, which has led to oil stockpiling activities and significant price increases of the fuel.
However, experts suggest that the main threat to the global supply chain and economy may be caused by Russian cyber-attacks. Russia is considered to have one of the world’s most advanced cyber warfare systems that can intervein with the work of crucial economic software. For example, Russian hackers already used such cyber technology in Ukraine in 2017. The attack resulted in the software malfunction of tax systems and impediment of industrial facilities, causing the damage of 7 billion dollars to various companies.
In conclusion, war can create many economic challenges that are especially destructive in the modern interrelated world. Political conflicts can disrupt the global supply chain, causing prices of materials, commodities, food, and energy to increase. Even though the rising prices are a severe problem, the significant economic concern with today’s war is connected with the threat of cyber security damage.