(Tiểu luận) topic the effect of the russia ukraine conflict on ukraine

Forecast decline in global cereal exports due to the Russian invasion of Ukraine in 2022, by cereal type and forecast model .... Ukraine Exports of iron and steel to Russia .... Imports

TRƯỜNG ĐẠ I HỌC NGO ẠI THƯƠNG

CƠ SỞ II TẠI THÀNH PHỐ HỒ CHÍ MINH

Specialization : International Business Administration

Thành ph H ố ồ Chí Minh, ngày 18 tháng 10 năm 2022

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THE EFFECT OF THE RUSSIA-UKRAINE CONFLICT ON UKRAINE

GROUP MEMBERS

1 Cao Minh Anh

2 Ngô Lê H o Nhiên ạ

3 Nguy n Tr n Liên Nhi ễ ầ

1.1 The roots of the war

Cao Minh Anh, Nguyễn Hoàng Nhật Vy1.2 Timeline

1.2 The purpose of this article

2.6 Possible strategies to recover Ukrainian

Chapter 3: Conclusion Nguyễn Hoàng Nhật Vy

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List of figures

Figure 1 Ukraine Imports of Goods 6 –

Figure 2 Ukraine’s Top 10 Imports 7

Figure 3 Ukrainian Importers Spending On Mineral Fuels-related Product in 2021 (billion US dollar) 7

Figure 4 Ukraine Imports: Year to Date: ME: Machines and Equipment 8

Figure 5 Ukraine Exports 10

Figure 6 Ukraine exports of grains to EU (million metric tons) 11

Figure 7 Ukraine’s Projected Share of World Exports 2021/22 11

Figure 8 Forecast decline in global cereal exports due to the Russian invasion of Ukraine in 2022, by cereal type and forecast model 12

Figure 9 Ukraine Exports of iron and steel 13

Figure 10 Ukraine Exports of iron and steel to Russia 14

Figure 11 Ukraine Inflation Rate 15

Figure 12 Ukraine Gasoline Prices 16

Figure 13 Gas exports to the EU by source 17

Figure 14 Import, export and trade balance between EU and Ukraine from 2011 to 2021 18

Figure 15 EU trade in goods with Ukraine and other non-EU countries from 2020 to 2021 18

List of tables Table 1 Ukraine’s Top 5 Exports By Category 9

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Document continues below

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Chapter 1: Introduction

1.1 The background of the Russia-Ukraine war

1.1.1 The roots of the war

Russian President Vladimir Putin declared war on Ukraine and launched airstrikes and plunged Europe into a nightmare not seen since World War II There had been a long-simmering conflict since Russia’s 2014 annexation of Crimea

The early 20th century saw a brief period of independence for Ukraine, the second-largest country in Europe by area after Russia, before it became part of The Union of Soviet Socialist Republics in 1922 In 2008, Ukraine decided to join the North Atlantic Treaty Organization (NATO), but this plan was postponed

In February 2010, a new Ukrainian President promised that Ukraine would be a “neutral state” and corporate with Russia and Western alliances like the EU and NATO

In 2014, Russia annexed Crimea, located along the northern coast of the Black Sea and recognized as being part of Ukraine This led to violence in Donbas and intense fighting and violence along the border regions that separated Russia and Ukraine to the East of Europe.Putin, who blamed the US and EU for prompting an "extremist" overthrow, answered with what was, until his full-out intrusion of Ukraine, the mainland in post bellum Europe: the seizure and extension of Crimea Russia proceeded to move supportive of Moscow nonconformist gatherings in Ukraine that broadcasted two free republics in the eastern Donbas locale along the Russian boundary, sending off a contention with the Ukrainian military that had guaranteed an expected 14,000 lives before the more extensive conflict's emission

Since then, Ukraine demanded to join NATO and the EU to reduce its reliance on Russia, which was opposed by Russia and resulted in Russian invasion on Ukraine

1.1.2 Timeline

• From February 24 to March 23:

Vladimir Putin, the president of Russia, announced plans to overthrow the Ukrainian government through a "special military operation." The West decided to impose financial and trade sanctions on Russia

• From March 25 to July 3:

While Ukraine launched a counteroffensive in the north and south, Russia refocused on the East Advanced missile systems were sent to Ukraine by the US and UK

• From July 4 up to now:

Russia expanded its goals again, including Kherson and Zaporizhia Ukraine used missiles

to devastate Russian ammunition, bases, and command posts deep behind the front lines

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1.2 The purpose of this article

The purpose of this article is to demonstrate the numerous effects of the Russian invasion

on Ukraine’s economy by comparing certain economic aspects of this nation before and after the war, namely national yield, international transactions, inflation, and employment Besides Ukraine, the following article also elaborates on some general impacts on EU regions and suggests potential solutions to address the problematic issues

In research from Bennett (2022), the war is the major cause for the economic catastrophe

in Ukraine, mainly due to the fact that Ukraine is an agricultural country The war in Ukraine also raises the spectre of worsening food security globally, because Ukraine is a significant food exporter Wheat and sunflower are mostly grown in the south-east of Ukraine, where war damage is the most considerable Corn and soybean production is mostly concentrated in the north-east of the country, which has also experienced large-scale destruction, accounting for 28 percent of the country’s corn production and 20 percent

of soybean production

Aside from direct war damage, agricultural production is hampered by lack of fuel, access

to seeds, fertilizer and equipment According to the Food and Agricultural Organization,

in this spring, a fifth of agribusinesses have enough fuel to start planting There is a prediction that around a fourth of agricultural land in Ukraine will not be planted this year Ship operations have suffered restriction due to a significant negative damage to the seas and transport infrastructure in the Black Sea add to long-term logistical risks

2.1.1 Gross Domestic Product (GDP)

Overall, after a reduction of 15% in season 1 of this year, GDP of Ukraine continues to decline in season 2 At 8/9, Ukraine statistics observed that the economy of this country dramatically fell by 37% in season 2 compared to the same period of last year The CEIC.com’s data (2022) on Ukraine’s GDP states that a negative growth of 15.1% was seen in the GDP in Ukraine, with a subsequent decline to end at 19.1% YoY in Jun 2022 Real GDP growth year-on-year data in Ukraine has been updated quarterly, available from March 2002 to June 2022, at an average rate of 3.3 Gross National Product (GDP) in Ukraine reached 19.1% YoY in June 2022, following negative growth of 15.1% in the previous quarter

2.1.2 Gross National Product (GNP)

Overall, Ukraine’s GNP was at about 30,5k USD mn in 2019, with a subsequent fluctuation between 30k USD mn and 50k USD mn until April 21, before increasing dramatically to 64k USD mn so far As reported by CEICdata.com (2018), Gross National Product in Ukraine was recorded at 47.3 USD bn in Dec 2019, after which it experienced a dramatic decrease to approximately 33.7 USD bn in Jul 2020 The same pattern was seen in this figure in season 1 of 2021, from 46.5 USD bn to 35.7 USD bn At the end, the GNP of Ukraine recorded an increase from the previous number of 54.529 USD bn for Sep 2021 and reported at 63.907 USD bn in Dec 2021

a specific observation, the figures were witnessed to emerge over the first 9-month period, before reaching a peak of 72,816,817 USD in December 2021, and finally plunged significantly at the beginning of 2022 with 6.186,613 USD

Figure 1 Ukraine - Imports of Goods

Source: https://www.economy.com/ukraine/imports-of-goods

2.2.1.1 Mineral fuels, oil, and mineral products

Anayi et al (2022) suggest that the Russia-Ukraine was such a shocking event to the world's economy Commodity prices, including energy, have escalated as uncertainty about supply disruptions has arisen (Bachmann et al 2022, Chepeliev et al 2022)

Ukraine has always been a major importer of mineral fuels, oil, and mineral products In fact, in 2021 the country saw 19.9% of total imports taken over by these categories, which costs the nation approximately 13,97 billion USD, according to Workman (2022)

Figure 3 Ukrainian Importers Spending On Mineral Fuels-related Product in 2021

Processed petroleum oils Petroleum gases Coal, solid fuels made from coal Others

2.2.1.2 Machinery and equipment

Tsivkach (2021) affirms that Ukraine possesses many of the qualities required to establish itself as a significant global manufacturing base A propitious geographic location near markets in Europe and the Middle East is one of its advantages Besides former Soviet Republics countries, the EU countries are also Ukraine’s major import partners Regarding international trade, the category of imports including machinery and equipment has witnessed dramatic fluctuations The below figure demonstrates the monthly figures for Ukraine’s imports of machines and equipment during a course of 2 years, commencing from 2020

Figure 4 Ukraine Imports: Year to Date: ME: Machines and Equipment

Source:

https://www.ceicdata.com/en/ukraine/imports-by-commodity-ytd/imports-ytd-me-machines-and-equipment

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beginning of the researched timeframe, it entered a period of an abrupt plummet from December 2020 to January 2021 From this time onwards, the figure progressively rose throughout 2021 and reached its highest of all time (apart from the peak in December 2008) Corresponding to the slump at the beginning of the previous year, January 2022 also saw a swift drop in the data on Ukraine’s imports of machines and equipment It, notwithstanding the gradual increase during 2021, stabilized within the period between February and April 2022 This occurrence could be attributed to the aftermath of Russia’s invasion as Ukraine appeared to allocate government budget on military forces and subsidies on residents more than on other merchandise

2.2.2 Exports

In Ukraine, exportation is a key factor in stimulating economic activities and promoting national growth According to the World Bank collection of development indicators (World Bank, 2021), 40.75% of Ukraine’s GDP came from exports of goods and services, which was over a third of total national output With a growing economy, Ukraine establishes itself as the “breadbasket” of Europe (Invest in Ukraine, 2020), dealing with a variety of products in international transactions, mainly steel, coal, fuel and grains like barley, corn and wheat (Trading Economics, 2022a) The breakdown of Ukraine's major exports is as follow

Ukraine Exports By Category Value Year

Table 1 Ukraine’s Top 5 Exports By Category

Source: https://tradingeconomics.com/ukraine/exports-by-category

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success, progressing at an impressively rapid rate According to statistics, during the January-July 2021 period, exports of goods from Ukraine amounted to a figure of 35.51 billion USD, 33.4% more than in the same period of 2020 (UKRINFORM, 2022) However, upon the invasion of Russia on its territory at the end of February 2022, there have been major disruptions on Ukraine’s overseas trading The graph below clearly illustrates that exports in Ukraine saw a deep recession, falling from 5380.2 USD million

in February to 3166.50 USD million in June of 2022, three times lower than the former figure at the beginning of the year

Figure 5 Ukraine Exports

Source: https://tradingeconomics.com/ukraine/exports

2.2.2.1 Cereals

Grain exports are considered to be a cornerstone of Ukraine’s economy (Braun, 2022) As

of 2021, Ukraine attributed approximately 14 million hectares of land to the production of cereal and yielded an all-time high harvest in the same year 46 million tonnes of early –grains alone (Trading Economics, 2022b) The impressive amount of cereal produced enables the country to not only expand its agricultural industry but also supply grain products on an international scale Indeed, the potential for cereal production in Ukraine is immense, as illustrated by the total 10.5 billion USD in cereals Ukraine exported in 2020, making it the 3rd largest exporter of cereals in the world (OEC, n.d.) The table below shows in the EU’s market solely, Ukraine was the second largest exporter of grains for the

EU, accounting for 14% of total EU grain imports in terms of volume in 2021

6264.1

6793.3 6808.5

6011.4 5380.2

2647.2 2673.6 2912.6

3166.5 2928.5 3131

Figure 7 Ukraine’s Projected Share of World Exports 2021/22

Source:

https://www.reuters.com/markets/us/ukraines-rising-role-grain-exports-complicates-impact-crisis-2022-01-26/

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Notwithstanding all the growth of Ukraine’s cereal industry, the intrusion of Russia on the country has upended the economy and caused considerable turmoil in the exportation of this sector specifically Prior to Russia's military attack, the average export of grain was up

to 6 million tonnes a month, but the figure has plummeted to a trough of 1 million tonnes since then (Reidy, 2022) Still, expert’s predictions are, to a certain extent, unpromising According to estimates as below by Statista, worldwide wheat exports are forecasted to decline between 6.95% and 12.34% due to the Russia-Ukraine war The worst case scenario assumes no wheat exports from Ukraine for the entirety of 2022 on top of major recessions in both countries and a decline of Ukrainian production by 20 percent

Figure 8 Forecast decline in global cereal exports due to the Russian invasion of

Ukraine in 2022, by cereal type and forecast model

Source:

https://www.statista.com/statistics/1282395/expected-decline-in-worldwide-cereal-exports-due-to-war-in-ukraine/

2.2.2.2 Iron and steel

As stated by Beaubien (2022), the conflict with Russia has sparked worry throughout the world about how to deliver Ukraine's abundant production of wheat, corn, and sunflower oil its leading exports to international markets The nation's metalworks have suffered – –even greater devastation as a result of the war For instance, bulk iron ore exports from Ukrainian ports have entirely ceased These exports are transported in tons aboard enormous cargo ships

Mild scenario No Ukrainian exports

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allow other cargo ships to transit the Black Sea Although the procedure is time-consuming and expensive, some iron ore and steel are transported by rail to ports in Romania and Poland Logistics are made more difficult by the fact that Ukraine's railroads operate on a different gauge of track than Western Europe, necessitating the shifting of goods at the border gate

Throughout 2021, Ukraine exported iron and steel worth 13.14 billion USD The exports

of iron and steel in Ukraine witnessed a slight decrease overall from 2012 to 2021 To be more specific, the figure went down during the first half of the period, from roughly 15 to 7.5 billion USD in 2016 Then, it increased to 10 billion in 2018 before rolling down to nearly 7.5 billion in 2020 However, the number went up by around 13 billion USD at the end of the timeline

Figure 9 Ukraine Exports of iron and steel

Source: https://tradingeconomics.com/ukraine/exports/iron-steel

Ukraine exports of iron and steel to Russia was 841.66 million USD during 2021 The figure in iron and steel exports to Russia from Ukraine experienced a downward trend, in general Particularly, the number considerably decreased from 2.3 billion USD in 2012 to nearly 0.7 billion in 2016 After that, it fluctuated between 2017 and 2021 However, the year 2020 witnessed the lowest figure throughout the period at roughly 0.5 billion USD