IEI: Geopolitical Tension: Russia-Ukraine

 Geopolitical Tension: Russia-Ukraine

    In 1991, after the Soviet Union had collapsed, Ukraine declared its independence from Moscow. The pro-Russian politician Yanukovych won the presidential election in 2010. Three years later, his administration decided to halt trade and alliance negotiations with the EU in order to re-establish economic ties with Moscow. Ukraine was turned into a battleground in 2014 when Russia invaded Crimea and started aiding separatists in the Donbas region in the southeast of the country. Russia launched a military invasion of Ukraine in February 2022 with the aim of toppling the Western-aligned Volodymyr Zelenskyy administration. Malaysia and the rest of the world had been impacted by the Russian-Ukrainian war.

    There are several factors that contribute to the geopolitical tension between Russia and Ukraine. First, it is Ukraine's advantageous strategic location. The Ukraine region, especially the Crimean Peninsula, is of great strategic military importance. Next, Ukraine is an important route for the import and export of natural gas from Russia to the EU. The second reason is that Ukraine's place in NATO's eastward expansion makes it a geopolitical focal point. The United States seeks to strengthen NATO's influence in Eastern Europe and the Asia-Pacific region. Thirdly, Russia's continued opposition to NATO's eastward expansion remains the primary cause of conflict between Russia and Ukraine, while the need for Russia and the United Kingdom to reach a strategic agreement in the future.

    Moving on to the first effect of the war between Russia and Ukraine, was the destruction of physical assets. The damage to buildings and infrastructure during the war amounted to at least $108. The people may not access basic sources of income because they lose their jobs and productive assets. Next, this geopolitical tension has led to severe unemployment in Ukraine. Repeated attacks on Ukraine's infrastructure and the takeover of numerous Black Sea ports have weakened imports and exports. An estimated 4.8 million jobs have been lost in Ukraine as a result of Russian aggression. For its part, Russia has been subjected to a series of unprecedented trade and financial sanctions from foreign governments, such as capital market bans, asset freezes, and withdrawal from the rapid communications system. As a result, Russian commercial banks affected by the new sanctions hold assets worth more than 91 trillion roubles. Additionally, financial sanctions caused Russia's economy to decline. For example, mortgage loans fell from 36% to 21%, non-performing loans on mortgage arrears increased to 35%, foreign direct investment such as the ban on foreign exchange loans to non-residents and transactions decreased, and oil and gas exports declined.

    Malaysia was one of the nations impacted by the rise in crude oil prices due to the Russia-Ukraine war. Malaysia's total commerce with Russia increased by 88.5% in 2019 despite a fall in exports to that country as we depended more on Russian fertilizer imports. Trade with Ukraine increased overall by 108.1%, with exports growing by 77.9% and imports growing by 131.2%, as and this rise imports of sunflower seeds and oil from Ukraine. Crude oil prices have increased, which has benefited Malaysia as an exporter of palm oil and oil. Second, the Russia-Ukraine war has also pushed up commodity prices and inflation in Malaysia, as Russia is the largest exporter of wheat, gas and fertiliser, while Ukraine is an exporter of seed oil and corn. The cost of animal feed increases. This causes the price of chicken to rise. Besides that, Malaysia is affected by national interest rate pressure. With oil and other commodity prices rising, the Federal Reserve, the European Central Bank and other central banks have raised interest rates. This will have an impact on bank lending and mortgages. This could hamper economic growth.

    For global impact, a rise in global energy and global supply chain disruption have resulted in inflation. The Ukraine-Russia war shows the impact, since we know that Russia, the world's third-largest oil producer and second-largest natural gas producer, supplies more than 40% of Europe's energy needs. Further, the battle has an indirect effect on the price of natural gas and world oil markets. Ukraine has shut down the Russian natural gas pipelines which used to reach Europe. Natural gas prices had soared by 580% throughout Europe as a result of supply disruptions by the end of March 2022. Ukraine-Russia war adversely impacts the world economy, particularly Europe, which is at risk as a result of its dependency on Russian gas. In fact, the German government spent $300 billion to shield its consumers and companies from growing energy prices. Secondly, the immediate influence on the oil market has caused oil prices to rise past $100 per barrel. The price then skyrocketed to $139/barrel, the highest in over 14 years. Similarly, the price of gasoline has risen dramatically. The average price of gasoline in the UK grew to 155 pence per litre in 2022. For example, Japan has entirely freed itself of Russian energy. In fact, the yen has dropped 2.6% versus the dollar, more than any other major currency.

    To sum up, geopolitical tensions between Russia and Ukraine would have significant global consequences. As indicated, Ukraine is the principal food supplier and European energy conduit in the geographical fortress of the Black Sea. Additionally, Ukraine is known as GEO-FOCUS because of its location in NATO's eastward expansion. Besides, the United States and Russia should also come to a future strategic agreement in light of Russia's steadfast opposition to NATO's eastward expansion. To highlight, several impacts on the global economy: inflation due to commodity price increases; political risks and economic growth constraints; and disruption of worldwide supply systems. To overcome this, the United Nations, Russia, Turkey, and Ukraine established the Black Sea Grain Initiative. This agreement has benefited both countries and other countries as it gives Ukraine and Russia a safer way to export fertilisers, grains, and other food items to other nations through safe maritime humanitarian corridors. To maintain stable development, the authorities behind this initiative must be strengthened with more effective regulations and implementation.