The Ukraine war and threats to food and energy security: Cascading risks from rising prices and supply disruptions

Abstract

Global resource markets are still reeling from the impacts of Russia’s invasion of Ukraine; the two countries are major suppliers of energy, food and fertilizers. Supply disruption and the sudden imposition, in response to the crisis, of unprecedented economic sanctions, trade restrictions and policy interventions have caused prices of commodities to skyrocket. Before the conflict, demand for global resources already exceeded supply and drove up prices as economies rebounded after the COVID-19 pandemic. This gave rise to a global cost-of-living crisis, characterized by increasing levels of energy and food poverty. This situation is likely to become much worse as a consequence of the war in Ukraine, and poses a threat to human security, particularly among low-income and vulnerable populations. Governments must invest now to build resilient societies and economies to meet these long-term challenges. Mitigating the most immediate harms to populations is a top priority for policymakers, but failure to keep long-term objectives in mind – climate change mitigation, in particular – can lead to bad decisions that further embed existing fragilities in economic and social systems.

Impacts of the Russia-Ukraine War on Global Food Security: Towards More Sustainable and Resilient Food Systems?

“…In 2020, Russia was the world’s top fertilizer exporter, with an estimated $7.6 billion in exports [ 72 ]. Around one-sixth of the world supply of potash fertilizers is exported by Russia, as is more than one-tenth of nitrogen fertilizer exports and around one-sixth of mixed fertilizer exports (containing two or more of nitrogen, potassium, and phosphate) [ 73 ]. In 2020, Belarus exported $2.96B in fertilizers, making it the sixth largest exporter globally.…”

“…In the same year, Belarus was responsible for around 17.6% of the global potash production (K) [ 74 ]. Both Russia and Belarus are part of a cartelized potash market that accounts for one-third of worldwide exports and determines the price of potash on the global market (the other half consists of Canada and the USA) [ 73 ]. In addition, Russia is a large natural gas supplier, the primary raw material for nitrogen fertilizer.…”

“…Secondly, additional constraints on supply arising from trade policy measures taken by individual countries put more pressure on the global market. For example, China, a major producer and supplier of phosphate-based fertilizers, has decided to restrict fertilizer exports from July 2021 through June 2022 to ensure domestic supply [ 73 ]. Further, following several countries’ sanctions on Belarus in 2021, the global potash market faced more turbulence [ 76 ].…”

“…In addition, Russia dominates in exporting natural gas to fuel the production of nitrogenous fertilizers across Europe. The International Energy Agency (IEA) reports that Gazprom’s gas exports to Europe decreased by roughly 25% in the last three months of 2021 compared to the same time in 2020 as tensions rose [ 73 ]. Roughly 20% of global trade in natural gas comes from Russia, while it contributes about 40% of EU imports.…”

“…As the war continues, the potential scope of physical and economic disruptions to food and energy systems raises [ 73 ]. Indeed, with the war doubtful to be resolved shortly, its influence on global resource markets will grow, as will the possibility of highly significant ‘ripple effects’ or ‘risk cascades’ on economies and society across the globe.…”