War casts long shadow on world economy

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Six months to the day after Russia invaded Ukraine, the grinding conflict continues to be casting a shadow over the worldwide economic system, preserving power costs at elevated ranges and jeopardising the worldwide meals system.

Russia itself could also be staggering beneath the impact of western sanctions, however because the FT editorial board factors out, it’s nonetheless on its ft. Half the nation’s $640bn international trade reserves are frozen, a number of of its high banks have been lower off from the worldwide funds system and about 1,000 western firms — accounting for about 40 per cent of Russia’s GDP by one estimate — have stop the nation.

In response, Moscow has imposed capital controls and sharply raised rates of interest to regular the rouble. It has additionally nonetheless been capable of revenue from rising oil costs and elevated gross sales to China, India and Turkey. Oil manufacturing is simply barely under prewar ranges.

Oil apart, Russia’s abroad commerce has been severely broken. UK imports of Russian items are at their lowest degree ever recorded, in line with new information in the present day, with power imports falling to zero for the primary time. UK exports to Russia have additionally shrunk, or within the case of vehicles, ceased utterly. Chemical compounds and prescribed drugs stay unaffected by sanctions.

Though the collapse of commerce with Russia is without doubt one of the methods during which the struggle has affected the remainder of the world, far greater has been the impression on power and meals markets.

The newest twist got here this morning from Japan, the place the government is considering new nuclear power plants as power costs rocket, a outstanding turnround given the Fukushima catastrophe of 2011. Germany too is contemplating a U-turn on plans to exit nuclear energy by the top of the yr, as fears develop of shortages ought to Russia additional limit fuel provides. Fossil fuel companies, in the meantime, have earned a reprieve, if solely till extra sustainable sources are absolutely developed.

Whereas the power disaster is a precedence for policymakers in richer nations, their friends in poorer international locations additionally must cope with a severe meals disaster.

In Africa, hovering costs of nitrogen-based fertilisers, which have risen in step with pure fuel costs, have pressured farmers to chop output, whereas the implications of the battle have halted progress in creating economies equivalent to Bangladesh. And hopes that the latest resumption of grain exports from Ukraine might kind the premise for a broader rapprochement with Russia seem to have been dashed.

Excessive-profile Russians in the meantime proceed to be focused. The primary superyacht seized from an oligarch beneath sanctions was bought yesterday at an public sale in Gibraltar. Dmitry Pumpyansky, the proprietor of Axioma, a 236ft vessel price €55mn-€60mn, is alleged to be one of many businessmen closest to Russian president Vladimir Putin, with an estimated web price of £1.84bn.

Not all western states again the concept of sanctions, pointing to the surge in power costs. Some politicians, equivalent to France’s far-right chief Marine Le Pen, argue sanctions damage the French and different international locations more than they hurt Moscow.

The true ache, after all, is being felt by Ukraine and its folks. In line with new UN information in the present day, there have been at the least 13,560 civilian casualties since Russia invaded, whereas the cost of reconstruction is prone to high $750bn.

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