Russia-Ukraine Crisis: How It Affects The World And India

From NATO to India and gas to wheat - the impact of Russia's attack on Ukraine.

<div class="paragraphs"><p>Russian President Vladimir Putin. (Photographer: Christophe Morin/Bloomberg)</p></div>
Russian President Vladimir Putin. (Photographer: Christophe Morin/Bloomberg)

Russia launched missiles on targets across Ukraine in a full-scale escalation of conflict between the two countries, even as the UN Security Council was at the time discussing efforts to defuse tensions.

Ukraine President Volodymyr Zelenskiy imposed martial law across the country. Foreign Minister Dmytro Kuleba said in a tweet that Russian President Vladimir Putin has “launched a full-scale invasion of Ukraine” and vowed the country “will defend itself and will win”.

The "full-scale invasion" pushed Brent crude to more than $100/barrel for the first time in more than seven years, even as investors flocked to gold as the "only true safe haven" in sight. Bitcoin fell below $35,000. In India, Sensex and Nifty declined as much as 2.5% each in opening trade on Thursday.

"President Putin, in the name of humanity, bring your troops back to Russia. This conflict must stop now,” UN Secretary-General António Guterres said, even as U.S. President Joe Biden vowed “severe sanctions” on Moscow.

Russia views a preemptive conquest of Ukraine as the only way to prevent Ukraine from eventually joining the North Atlantic Treaty Organisation, or NATO, thereby bringing U.S. nuclear weapons to Russia’s borders.

Putin Declares War on Ukraine. What Is Behind the Invasion?

Here's a look at the global ramifications of the Russia-Ukraine crisis:

Europe’s Energy Crisis

Russia supplied gas to Europe all through the Cold War, and more recently in the aftermath of its annexation of Crimea. Moscow is unlikely to want to risk damaging its reputation as a reliable supplier this time around either, according to Uniper SE, one of the top buyers of Russian gas in Europe. (Read More)

Also Read: The EU Got Its Act Together Over Ukraine. What Now?

What’s At Stake For The Global Economy

Western nations are caught between the desire for harsh sanctions to deter Putin, and concern that they’ll suffer blowback themselves. For now, Europe and the U.S. have shied away from blocking Russia’s energy exports, or freezing it out of dollar-based finance. Even so, Biden warned Americans that there’ll be a price to pay at gasoline pumps back home. (Read More)

A Tough Balancing Act For China

Earlier this month, Putin and Xi Jinping met for the first time in more than two years, following which the Chinese president backed Russia’s demand for binding security guarantees from the U.S. and NATO in the standoff over Ukraine—providing vital support for Putin as he confronted the West. Yet now Xi’s government is striking a more nuanced tone as fears grow of an invasion despite repeated Russian denials. (Read More)

India And The Indian Economy

The situation in eastern Ukraine is in danger of spiralling into a major crisis, TS Tirumurti, Ambassador of India to the United Nations, said at the UNSC meeting on Thursday. Legitimate security interests of all parties should be fully taken into account, he said.

However, a surge in crude oil prices and the prospect of a recession in Europe in the event of a full-blown Ukraine war and stricter sanctions on Russia don’t augur well for the Indian economy, ICICI Securities said in a recent research report.

India is a large importer of crude oil. As such, the first point of impact of higher crude oil prices is the current account. Rising crude prices come at a time when the current account deficit has already widened. However, India today has far greater protection against any volatility in its balance of payments than in the past.

Also Read: India Should Stand With The West Against Russia

Commodities Heft

Russia is a commodities powerhouse, and Ukraine too is a major producer of wheat, and prices have risen as traders fret about the possibility of disruption to shipments via the Black Sea. That’s especially worrying for countries in North Africa, where volatility in the cost of bread has in the past triggered unrest and toppled governments. (Read More)

Mayhem In The Markets

Globally, the deepening Russia-Ukraine crisis roiled stocks to currencies.

  • The ruble tumbled to a record low of 90/dollar after the Moscow Exchange suspended transactions on all markets. Russia’s biggest stocks, including Sberbank PJSC, Gazprom PJSC and Lukoil PJSC were all down more than 10% in an early session before the halt. The Moscow bourse said trading will resume at 10 a.m. local time.

  • European stock futures tumbled along with global risk assets as Russian forces attacked targets across Ukraine and U.S. President Joe Biden says western allies will impose “severe sanctions” on Moscow.

  • The MSCI Asia Pacific Index slid as much as 2.8% to the lowest level since November 2020 after the incursion. Benchmarks in Australia, Hong Kong, Singapore and India posted declines of around 3% each.

“The brinkmanship on display is likely to escalate into unintended actions which the U.S. has alluded to being false-flag operations for Russia to justify further military action,” said Justin Tang, head of Asian research at United First Partners. “Look for traditional havens like gold, USD, and treasuries to outperform.”

How The Russia-Ukraine Crisis Impacts India’s Strategic Priorities