EC Indiana News

Ukraine invasion impacts us all

Tensions are increasing as the one year mark of the invasion of Ukraine by Russian forces nears on February 24.

Indiana University East faculty experts in the areas of economics and political science have followed the invasion and its impact on the Ukraine, Russia, the United States and countries around the world in the last year.

Kristoffer Rees is an associate professor of political science in the IU East School of Humanities and Social Sciences. He is the program coordinator for International Studies.

Rees received his Ph.D. in Political Science and Central Eurasian Studies and his M.A. in Central Eurasian Studies from IU Bloomington. He holds a B.A. in Psychology from Whitman College.

Rees’ research interests include nationalism; multiculturalism and identity politics, memory politics, language politics, political conflict and protest, post-Soviet regime transition and Central Asia.

Arkadiusz Mironko is an assistant professor of management and entrepreneurship for the IU East School of Business and Economics.

Mironko received his Ph.D. in International Business and his Master of Science in Global Affairs from Rutgers University. He holds a Bachelor of Arts in Management and Marketing from Felician College.

His research interests include international business strategy, corporate knowledge for flow management, entrepreneurship, innovation in Multinational companies, foreign direct investment, economies in transition, and virtual teams.

Just after the start of the invasion Rees and Mironko participated in a discussion on “Understanding Ukraine” hosted by the Diversity and Inclusion Committee at IU East. Daron Olson, associate professor of European and World History, in the discussion held in April 2022.

Since then, Mironko has traveled twice to the bordering region of Poland and Ukraine since the start of the invasion. He visited in March and October 2022.

“I visited to witness the efforts of various humanitarian organizations in offering support to refugees. During these trips, I saw firsthand the vital role that NGOs (non-profit organizations) play in providing food, medicine, housing, and assistance with formalities such as obtaining work permits,” Mironko said. “On my first visit, I also had the opportunity to deliver monetary donations, which were offered by my colleagues at IU East and myself, to a local non-profit organization that was providing food and shelter to refugees at the border and in the city of Lublin, Poland.”

Rees continues his research of the region and Central Asia. In March 2022, he wrote an article for The Diplomat on the impact Russia’s invasion had on Kazakhstan. “How Ukraine Could Remake Kazakhstan’s Relationship With Russia,” is available online.

Q&A with Kristoffer Rees and Arkadiusz Mironko

How has the invasion impacted Ukraine’s and Russia’s relationships with the U.S. in the last year?

Rees: Russia’s invasion of Ukraine has brought attention to U.S.-Ukrainian relations, generally towards strengthening that relationship. For example, President (Volodymyr ) Zelenskyy’s first trip abroad since the invasion was to the United States in December 2022. Moreover, the U.S. has been among the, if not the, leading nation rallying other nations and regional communities such as the European Union (EU), in support of Ukrainian defense. We can see this not only in terms of the dollar amount of aid sent to Ukraine, where the U.S. commitment far exceeds that of other countries, but also in terms of symbolic commitment, such as sending Abrams tanks, which likely induced Germany’s approval to send Leopard 2 tanks.

Unsurprisingly, the relationship with Russia has deteriorated. This can be seen in sanctions and export controls placed by the U.S. to restrict Russia’s access to technology used in warfare. Anti-U.S., anti-Western rhetoric in Russia has increased, with most official news outlets in the country articulating increasingly hostile views.

Mironko: In response to the latest invasion of Ukraine, the U.S. imposed economic sanctions on Russia, targeting key sectors of the Russian economy, such as finance, energy, and defense. As the result many foreign companies stopped operations in Russia or moved out. The sanctions have had some immediate impact on the Russian economy, contributing to a decline in economic growth and investment. I think the long-term effect of sanctions will be more detrimental to Russia as it will lack access to new technologies and innovation procured from the advanced economies. The sanctions have also strained U.S.-Russia relations, with Russia pushing back against what it sees as unfair treatment by the U.S. and its allies

What is the impact on each countries’ relationships with other leading world countries?

Rees: In very broad terms, we see Ukraine increasingly aligned with the West, both economically and politically, whereas Russia has, to a degree, retreated inward, focusing primarily on relationships with other highly authoritarian states such as China, North Korea, and Iran. There is a long history of Sino-Russian relations where Russia maintained a dominant role; there are indications that Russia’s invasion of Ukraine may invert that role, such that Russia is increasingly reliant on China as a trading partner rather than the other way around.

What kind of impact does the continued invasion have on U.S. gasoline prices?

Rees: It is difficult to isolate the effect of Russia’s invasion of Ukraine on gas prices in the U.S. since there are many different factors that work together to determine the price of oil at any given time. Oil prices have been going up in general as demand has increased due to economies reopening globally as attention to the COVID-19 crisis has receded. That said, Russia’s invasion of Ukraine appears to have caused an initial spike in gas prices that has largely receded. Going forward, other factors, such as increasing global demand, particularly as China emerges from COVID lockdowns, are likely to have a substantial impact on gas prices.

Mironko: The ongoing war between Russia and Ukraine has a limited direct impact on U.S. gasoline prices. However, geopolitical tensions in the region can sometimes lead to an increase in global oil prices, which can indirectly affect U.S. gasoline prices. As the global oil market is closely interconnected, and any disruptions or tensions in major oil-producing regions can lead to a rise in oil prices on global market, which can then impact gasoline prices in the United States.

Increasingly as countries, especially in Europe, wean itself off Russian oil and gas the impact of war on energy prices should decrease. Barring any other global emergencies, other large oil suppliers like the U.S., Saudi Arabia, Canada and others will continue to fill in the demand. Meanwhile, there are some countries, such as India and China, who benefit from cheaper Russian oil at the moment. In fact, in the U.S. there is no reason for increasing oil prices other than the impact of global supply and market which means that as the global price for oil fluctuates the U.S. oil companies will also adjust its prices accordingly. The U.S. oil and gas supply does not depend on Russia, hence there should be no direct threat to oil supply because of the conflict.

Additionally, globally there is a growing trend towards investment in both renewable energy technology and infrastructure, as well as in oil and gas extraction, as reported by the FDI Intelligence Report (The 2022 investment matrix, February 1, 2023).

Are there other products that are regularly used in the United States that are also impacted by the ongoing conflict? What about any of our exports?

Rees: At the consumer level, as far as I know, there isn’t much in the way of products that come via Russia or Ukraine. Even vodka, for example, which we often think of as a specifically Russian spirit, and which is the most popular spirit in America before the war, only about one percent of vodka sold in the U.S. is of Russian origin. However, the U.S. has been reliant on Ukraine and Russia for commodities like neon gas, platinum, and pig iron, which are raw materials used in automotive production and in electronics industries. Some experts estimate that changes in export of these raw materials could have a direct impact on about 12% of the U.S. economy. One example of the impact of Russia’s invasion of Ukraine on U.S.-sourced services and goods is that it led to Boeing (as well as Airbus) terminating its leasing and maintenance contracts for several 100 airliners operated by airlines in Russia.

Mironko: Since the start of the war the world has experienced increases in prices of many commodities besides oil such as coal, gas, wheat, corn, and many so called “rare earths” nickel, platinum, zinc, gold, copper, and iron ore among others. As Russia is a large supplier of many of these metals the supply and the prices were destabilized because of the war. To the extent that other markets can open up for these commodities they will be replaced and prices will likely stabilize but most likely not decline anytime soon. As popularly discussed, the prices of food and many other products, as well as energy prices will remain more volatile for the foreseeable future as the supply of the affected commodities will meet the demand.

It’s also worth noting that the U.S. and other countries have imposed economic sanctions on Russia in response to the conflict, which can limit trade and investment between the two countries. As the result of the sanctions Europe is rapidly trying to diversify its sources of oil and natural gas. The U.S. became an increasingly larger exporter of natural gas to Europe in 2022 and will probably continue the trend going forward.

One year later, how is the conflict influencing food insecurities there and abroad?

Rees: Russia and Ukraine are both large global exporters of cereals, such as wheat and corn, and especially serving markets in the Middle East, Asia, and Africa. Ukrainian sunflower seed and oil makes up over 50% of the global trade in those goods. Earlier during Russia’s war on Ukraine, there was a blockade on Ukrainian ports that prevented food export from Ukraine, which drove already high global prices up even further. Exports have since resumed, and prices are falling, but Russian obstruction at ports continues to cause delays and increase costs. The food insecurities introduced by Russian actions have a disproportionately large impact on developing countries and countries in Africa, which are major importers of Ukrainian food supplies.

Mironko: The latest conflict escalation in Ukraine has had a significant impact on food security both within the country and abroad. The food insecurity is significantly impacting most of the world, if not by limited supply then by increased prices. Unfortunately, most affected are the countries and people who have the least of means because of rising prices of food. Similarly, to oil and gas supply, with time the food shortages will also be dealt with by accessing and creating new producers as well as using substitute products, say corn instead of wheat, that are available elsewhere. All this takes time, may increase costs, and lead to permanent change in the food market conditions.

•    Disruptions in food supply chains: The conflict has caused disruptions in food production, transportation, and distribution, leading to food shortages and increased prices.

•    Economic instability: The conflict has contributed to economic instability in Ukraine, making it more difficult for people to afford basic necessities, including food.

•    Some of the ways in which the conflict is influencing food insecurities include:

•    Destruction of agriculture: The conflict has resulted in the destruction of agriculture in affected regions, reducing the ability of local communities to produce their own food.

•    Displacement of populations: The conflict has displaced large numbers of people, making it more difficult for them to access food and other basic necessities.

These factors have led to increased food insecurity both within Ukraine and among neighboring countries hosting refugees. The international community has responded by providing humanitarian aid to those affected, but more needs to be done to address the underlying causes of food and energy insecurity in the region.

How differently may Americans be viewing the conflict from those who are living it every day?

Rees: I don’t want to make generalizations, but I think it’s very difficult to imagine what it must be like to live in an active war zone, not knowing, when you go to bed, if your house or apartment will be bombed overnight. This experience is traumatic in and of itself. The most comparable experience I’ve had is my experience living in the capital city of a country as it underwent violent political change driven by mass protests, and I don’t believe this is even remotely comparable. I imagine simply trying to exist and to live some semblance of an ordinary life under the constant and unpredictable threat of missile attack is 1000s of times more stressful, disruptive, and traumatic than anything I’ve ever experienced.

Mironko: America is positioned between two large oceans which provide a relative sense of security from most military conflicts abroad. Besides occasionally seeing reports on TV or in press we have minimal exposure to the conflict. When our government offers financial and equipment support to Ukraine or while many humanitarian and charitable organizations also offer assistance it can make us feel as though we do good.

On the other hand, those that live in Ukraine face daily direct challenges on how to go about their life. Although the country is at war, not all areas are directly affected or not affected to the same degree. There are cities, mostly in the east of Ukraine that are largely destroyed, their populations displaced to other parts of the country or even moved abroad. This poses long-term adverse consequences for Ukraine as its population is displaced or moves abroad, the country faces potential “brain drain” effect needed for the war effort, post-war recovery, and for economic growth.

Original source can be found here.