1 Year of Russia-Ukraine War
The war between Russia and Ukraine started on 24th Feb 2022 and it has now been 1 year with no immediate end in sight for this war.
What has happened in this 1 year and why we should know about it? This is not only important for India but for the entire world.
The maximum part of India’s imports is crude oil and petroleum.
Russia became the top oil supplier to India in December 2022, followed by Iraq and Saudi Arabia. Interestingly, alongside India, China is now the equal largest importer of Russian oil and has signed a new 30-year gas deal.
Europe reacted to the crude oil supply disruption from Russia in two ways:
- Looking for its gas elsewhere — The collapse of the supply of piped gas from Russia has forced Germany and many of its neighbors to source energy elsewhere including from Asia, the Middle East, and potentially Africa
- Accelerating the move to renewable energy — With China currently producing around 70% of all the world’s solar panels, some nations have already started to restructure their industries to be more self-reliant in renewable energy production.
The Indian Government is also looking to increase its renewable energy production.
European countries have responded with significant increases in their defense budgets, most notably Germany committing to 2% of its GDP for the first time after WW2 towards its military budget.
Finland and Sweden, two countries that have until now shunned NATO membership to avoid antagonizing Russia, are now set to join NATO.
Following the war and the sanctions imposed by the West, India has been trying to promote Rupee trade. This will help strengthen the Indian Rupee over the longer term.
Despite what you may hear or see in the media or social media on India-China relationships, China still remains India’s top import source as per April-December 2022 data, though it has come down slightly over the last 1 year.
Russia has emerged as India’s second largest import partner after China, ahead of the US and the UAE. Steel imports from Russia were up five times in volume terms in the last 1 year.
India’s export earning was the lowest in the last 13 months in Dec 2022 when we earned USD 34.5 billion.
The export of income-sensitive items like pearls, precious stones, etc. has not yet picked up because of the deepening global slowdown after the war.
There is a heavy fall in gold and silver imports which dropped to USD 1.3 billion — a decline of 73% year-on-year.
Above all, the biggest threat is in the domain of Food Security.
Together, Russia and Ukraine export nearly a third of the world’s wheat and barley, more than 70% of its sunflower oil, and are big suppliers of corn.
With both Russia and Ukraine being major exporters of agricultural fertilizers, the disruption to global food chains drove up prices to all-time highs, fuelling a cost-of-living crisis in both developed and developing nations.
In Africa, 85% of the population is dependent on imported wheat. In countries like Nigeria, a top importer of Russian wheat, average food prices skyrocketed 37% in the last year. In Spain, the government is spending 300 million euros to help farmers acquire fertilizer, the price of which has doubled since the war in Ukraine.
Given this war situation, there is huge pressure on nations around the world with rising food prices and with fertilizer imports down, many countries around the world may face a famine situation very soon.
The scenario is slightly different in India where the production of wheat has picked up in the country. We are trying to fill the gap in wheat export the world is experiencing because Russia and Ukraine are at war with each other.
We are also struggling with fertilizer imports, perhaps not as much as other countries. However, our policies are enabling India Inc to try hard and become self-sufficient in the production of fertilizers.
The rest of the world also sees China as an active partner in what Russia does. They do not want to rely on China alone any longer.
Many other countries have started working on a “China+1" strategy and India is very lucratively placed to be picked as that alternative.
So, this 1-year post the start of the Russia-Ukraine war, there are both challenges and opportunities that have come up for all the countries, including India.
Thus far, we are trying hard to put the best foot forward and it seems to be working.