Ahmed Bahakim (South24) 

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Economic Implications

Russia’s attack of Ukraine carries great liabilities for the global economy that’s yet to fully recover from the COVID19 pandemic shock. The clash already looks like the most severe war in Europe ever since 1945. The acceleration of conflict is likely to further boost fuel and food prices and specially grains in the most import-dependent country in the planet. Food prices have more than doubled in Yemen over the past year, leaving more than half of the population in need of food assistance. Higher food prices will drive more people into the cruel circle of hunger and dependence on humanitarian assistance.

The warfare will result in the isolation of the world’s 11th-biggest economy and one of its greatest commodity producers. The critical implications to our economy in Yemen will be larger inflation, lower growth and big disruptions to the financial market as further sanctions might take hold. The longer- term fallout will be a further debilitation of the global integrated financial system that has strained the world's economy since the Soviet Union fragmented in 1991.

Starting with the commodity shocks. Russia considered to be one of the world’s biggest oil producers and a primary supplier of industrial metals such as aluminum, palladium and nickel. Both Russia and Ukraine together are main wheat exporters to Yemen, therefore, the prices of these commodities have been surging this year and are now most likely to upsurge even further. Amid reports of outbreaks across Ukraine, the price of Brent oil breached $100 per barrel on the morning of February 24th, people in Aden felt the impact through a sudden increase in the next morning to find diesel prices has breached 1300YR/Liter.

Yemen imports most of its wheat from the global food markets, 98% of its wheat demand is imported from five primary countries (Russia, United States of America, Australia, Ukraine and France).

Both Russia and Ukraine are major wheat exporters to Yemen. Wheat shortages will eventually hit Yemen's fragile economy even harder. Yemen’s economic crisis has already undermined its nation’s ability to purchase food, with prices increasing rapidly in less than three years.

Source: World Integrated Trade Solution (WITS)

Yemen imports wheat to meet most of its needs, with about 40% percent coming from Russia and Ukraine. The government officials have announced that the country has relatively 4 months' worth of wheat in storage.

Source: World Integrated Trade Solution (WITS)

Egypt is the world’s greatest importer of wheat, 80% of its imports arrive from the Black Sea area. Although the government initiated to diversify its supplies in the run-up to the Russian attack to Ukraine, signs of supply deficiency are already apparent. Egypt collected a large number of bids for a wheat tender last month, but this week canceled a tender after earned only one high-priced offer. Its strategic stock accumulation of wheat will stand for less than four months. roughly 30% percent of Egypt’s society lives in poverty, and many of the poverty-stricken rely on subsidized bread for nutrition.

Rising energy and food prices will intensify the inflationary pressures that government officials and central bank leasers in Yemen are struggling to ease. The estimation of a worst-case scenario of an escalating conflict and sanctions could send oil prices up to as much as $140 a barrel which will rise the fuel price in Aden to 36000YR/20Liter consequently, the prices of all products and services will rise rocket high.

Humanitarian Crisis

According to World Population Review, Ukraine’s present population is 43.3 million. It states, “Ever since the 90s, Ukraine’s population has been depraved due to tremendous emigration rates, flat birth rates, and considerable death rates, large numbers left the country because Ukraine considered the second-poorest country in Europe, is in war with Russia to its east, and is circled by corruption. The population is presently declining at a rate of 0.59%, a rate that has been expanding every year since 2015. The United Nations concludes that Ukraine could drop nearly one-fifth of its population by the year 2050.”

Already Ukrainians are leaving the country or fleeing areas that have been under Russian aggression or at risk of further war conflict. On March 1, 677,000 people have left Ukraine to neighboring EU- countries within one week. Around 150,000 within the last 24 hours. This is in extension to the hundreds of thousands who have been displaced internally within the country.

575,400 who had fled the country by Feb. 28, the broad majority (nearly 340,000) have fled to Poland. Other refugees fled to different EU-countries, including: Slovakia (30,000), Hungary (94,000), Romania (34,000), Moldova (40,000) and Russia (129,000). The rest (34,000) have fled elsewhere inside Europe.

Source: UN High Commissioner for Refugees Data as of Mar. 1. NT

Aid groups will need secure and unlimited access to all war-affected areas according to the core humanitarian principles of humanity, neutrality and operational sovereignty. With more than half a million refugees having fled Ukraine to neighboring countries in the past five days alone, and Extra more to be expected, support is also must-have to fit the critical requirements of those seeking protection behind the country's borders. The UN High Commissioner for Refugees stated: ‘We are facing what could become Europe’s biggest refugee crisis in this century. While we have observed exceptional solidarity and hospitality from neighboring countries in accepting refugees, as well as local communities and private citizens, a lot of support will be needed to assist and protect new comers.’

Humanitarian agencies for the Ukraine situation demands for a preliminary $550.6 million to be able to provide help to refugees in Poland, Moldova, Hungary, Romania and Slovakia, along with other countries in the region in order to support host countries to provide shelter, emergency relief plans, money assistance, and psychosocial support to those who fled Ukraine, in addition to people with specific needs, such as unaccompanied kids.”

The UN assessment concludes that 12 million family members inside Ukraine will urge for relief and protection, whereas more than 4 million Ukrainian refugees will need protection and assistance in the neighboring countries within the upcoming months. 

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Ing. Ahmed Salem Bahakim

Ing. Ahmed Salem Bahakim is an energy researcher, working as Information Systems Specialist at the Public Electricity Corporation (PEC) in Aden.

Photo: A Yemeni girl in a displaced persons camp in Razih district in Saada province, Yemen, on 4 February 2020 (Reuters)

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References:

• United Nations High Commissioner for Refugees

• World Bank - World Integrated Trade Solution (WITS), https://wits.worldbank.org/

• World Food Program (WFP)