The Ukraine-Russia War and Its Impact on the Global Economy

ukraine russia

By Kalim Siddiqui


The impact of the war in Ukraine cannot be limited to Europe; it has implications for the global economy. The question is what will its global economic consequences be? And what will be the result of the unprecedented sanctions imposed on Russia?

Here, I will focus on the issues of economy, sanctions, the role of the IMF, militarisation, and the looming food crisis, especially in poor countries.

We must mention that 38 countries that are members of the Organisation for Economic Cooperation and Development (OECD) dominate and play an important role in the performance of the global economy. Within those countries, the G20 members represent 85 per cent of the GDP, 75 per cent of international trade, and two-thirds of the world’s population. By 2023, the expected slowdown of large emerging economies, including China, will adversely affect global economic growth, as the world’s economic centre of gravity is shifting toward Asia (Siddiqui, 2021a; 2021b). China and India will take on a rising share of the world’s output, eventually exceeding all the OECD countries together (Siddiqui, 2020b).

According to the World Bank (2022), many countries will suffer serious economic consequences due to the Russia-Ukraine war. Both Ukraine and Russia are major exporters of agricultural commodities and oil, and the disruptions to supplies of these commodities have led to a further price hike. They are also the largest exporters of fertilisers, another crucial agricultural input. The war resulted in shortages of supply and the price has sharply risen. Furthermore, this will adversely affect crop yields and food grain output in the coming years. Russia has also imposed several restrictions on the export of various commodities, including bans on wheat exports and other food products, which could further jeopardize global supply.

At the end of the Cold War, the United States emerged as the sole superpower, and “the end of history” brought American global primacy. The US then promised Russian leaders that North Atlantic Treaty Organisation (NATO) membership would not increase, and the East European countries would remain outside the Western military alliance. NATO was formed in 1949 with 12 members, and at present, its membership has risen to 30 countries (see the map). But the violation of promises made to Moscow now looks set to become a lengthy war, funded, and supported by the US and NATO. In the last three decades, the world has changed enormously, but the US ruling elites are still living in past and are trying to dictate the present according to their wishes.

nato european member

nato expansion
The US is deeply involved in this war, and the European crisis has provided an opportunity to launch its grand strategy. Indeed, the last two decades show us that the US has encouraged hostility and created an atmosphere of suspicion towards Russia by providing various economic, political, and military supports such as offensive weapons, economic assistance, and military advice to Ukraine. The US and Western media also have been building up the narrative of democracy versus authoritarianism, i.e., good versus evil. The NATO expansion continued after the collapse of the Soviet Union, which shows that for the US the Cold War had never ended. The US continued to see Russia as a threat to the US global strategic interests. The US policymakers are convinced that a long war and tension on Russia’s western border will weaken its economy. The ongoing conflict will ultimately be an economic strain on China and Russia–China’s strategic alliance will get one-sided and thus will benefit the US. It seems that the Ukraine-Russia war has given the US the opportunity for its already planned strategic competition. The US defense budget has increased sharply.

ukrainerussiaethno linguistic
In fact, in 1990, with the collapse of the Soviet Union, then President Mikhail Gorbachev hoped to integrate Russia into the Western alliance, like his successor Boris Yeltsin. But the US and UK were reluctant to accept such a move and saw that their long-term interests would be served by keeping Russia weak and backward.
The expansion of NATO beyond the borders of Germany is a violation of promises made to Russia in 1990, including the stationing of NATO troops and missile batteries in Eastern Europe. Moreover, the US involvement in the ousting of Ukrainian President Viktor Yanukovych in 2014 is clear now, which followed a civil war in the east of Ukraine between separatists and the Ukrainian army, a conflict that has claimed tens of thousands of lives.

The war in Ukraine is resulting in the tragic loss of life and human suffering, as well as causing massive damage to Ukraine’s physical infrastructure and industries and disrupting its agriculture production. With the Russian invasion, Ukraine’s economy shrank 45 per cent this year, although the contraction depends on the duration of the war.

Due to the current war, nearly two million refugees have been forced to move to neighbouring countries, including Russia. Countries with very close economic links with Ukraine and Russia are at particular risk of scarcity and supply disruptions and are most affected by the increasing inflows of refugees.

The West has announced unprecedented sanctions against Russia. It appears that the moves are aimed at destroying the Russian economy. The sanctions are not going to cripple the Russian economy. Russia is a large country and is now selling oil and gas for cash and earning more revenue through exports of oil and gas than last year, thanks to high prices in international markets.

Petroleum, gas, and food commodity prices have peaked, also adding to inflationary pressures resulting from supply chain disruptions. A price shock has impacted worldwide, especially for low-income households for whom expenditures on food and fuel are a higher proportion of their total expenses. The sanctions on Russia will adversely impact the performance of the global economy and financial markets, with significant spillovers to other countries.

Moreover, the sanctions against the Central Bank of the Russian Federation will severely restrict its access to international reserves to support its currency and financial system. International sanctions on Russia’s banking system and the exclusion of several banks from SWIFT have significantly disrupted Russia’s ability to receive exports, pay for imports, and engage in cross-border financial transactions.

Ukraine’s population dropped since the conflict began in 2014, from 53 million to 41 million. We have 14 million or so displaced persons, either refugees or internally displaced persons. The war has caused massive destruction of infrastructure and economic damage in Ukraine.

Finland and Sweden are trying to join NATO. We should not forget that Sweden has a very large weapons industry and markets are very important for increasing profits and investments (Siddiqui, 2019c). Perhaps rising tension in Europe and NATO membership could open up new prospects for its expansion.

A sizeable number of Russian-speaking people still live in the eastern part of Ukraine. The US and EU want Ukraine to be an integral part of the EU and even of NATO to counter the growing assertiveness of Russia.

Germany has increased its defense budget to 2 per cent of the country’s GDP, a move that will make the country the third military power in the world. Sweden and Finland would like to join NATO. Sweden has a substantial weapons industry and would like to expand its arms markets. Sweden and Finland are joining NATO to become subservient to US strategic interests. The US is happy with Russian aggression to increase military expenditure, and such a move terrifies the public, which supports military expansion.

The use of multi-currency exchange has recently risen, which could be the death blow to the US dollar. Foreign debt finances all US wars. If the value of the dollar goes down, no country will want to have US dollars, and the demand for US Treasury bonds will weaken and adversely affect the US empire (Siddiqui, 2019b; 2019c).

The paper addresses the serious international imbalances that have led to the war and exacerbated other phenomena: a growing “global protectionism”, the decline in the growth rate of the world economy, and the restructuring of global value chains. The paper seeks to link these manifestations together from a historical perspective. The intent is to open a debate on international policies that could contain these effects and favour future paths that do not follow the inauspicious ones of a distant past.

Sanctions and Energy Crisis

The NATO strategy against Russia seems to be in danger of failing. This strategy is two-pronged: provide Ukraine with money, weapons, and technical assistance, and implement economic sanctions against Russia. In March 2022, European countries imported 40 per cent of their total gas consumption needs from Russia, and since the war, gas prices in international markets have increased fivefold. Figure 1 indicates the US-led sanctions against countries. It has led to a surge in energy prices in the international market. For instance, it appears that the economic sanctions against Russia are not working, and now Russia is making more money than in the pre-war period (see figure 2 and figure 3). For example, it is estimated that, with oil and gas exports, the Russian government’s revenue will be US$285 billion by the end of 2022, up from US$236 billion in 2021. Meanwhile, Europe is facing the worst energy crisis in fifty years (Posen, 2022).

figure 1 united-states
Source: Barry Posen, 2022. implications-of-the-ukraine-russia-war

figure 2 petroleum

figure 2c
Source: World Bank, 2022.
figure 3 prices
Source: IMF, 2022a.

Moreover, Russia is the world’s largest exporter of oil, gas, and wheat, and the second-largest exporter of sunflower oil. Ukraine is the world’s fifth-largest wheat exporter and second-largest exporter of maize. The price of all these core commodities has risen sharply due to the war. Economists predict that the price will surpass US$200 a barrel this July-August, a third higher than its record high of US$147 per barrel. Before Putin’s war, the Bank of England expected consumer price inflation to peak at 7 per cent by April 2022, but now it is widely expected that prices in the UK will increase by as much as 10 per cent in October 2022 (Posen, 2022; Wolf, 2022).

The IMF should extend loans at lower rates to low-income developing countries, so that they can afford to import food grains and distribute them to people at affordable prices.

There is no doubt that the energy sector dominates the Russian economy, and revenue from oil and gas makes up half of the government’s annual budget. And any attempt to cut down supply will only drive international prices up and hurt customers. Europe is dependent on Russian energy supply, and it cannot suddenly shift to other suppliers. Any such drastic move will lead to the collapse of its economy. Germany, Europe’s largest economy, is already heading for a recession in 2023.

The other question that comes to mind is concerning these sanctions. It did not work against Saddam Hussein in the 1990s. Most countries do not apply sanctions against Russia. The West relies on economic sanctions to coerce Russia into ending its support for the insurrection in eastern Ukraine. The sanctions are also to remove Putin, but such a policy did not work in Venezuela.

In July 2022, the US and the EU put their third round of limited sanctions in place, targeting mainly high-level individuals closely tied to the Russian government banks, energy companies, and defence. It seems that sanctions against Russia have backfired. The acceleration of the multipolar world is a recent phenomenon.
The BRICS countries do not support sanctions against Russia. Although India and China are at odds with one another and have very different political systems, each prefers to maintain good relations with Russia, and they have not condemned the Russian attack on Ukraine. Many developing countries find it difficult to take sides in this war (Siddiqui, 2016; 2019a).

Increased Militarisation

In the US, militarism remains very powerful and has become, in a sense, detached from the ideological conceptions that were very much part of the neoconservative world view. The neoconservatives hoped that the US had a mission to spread liberalism and free market capitalism worldwide.

The US-led wars around the world since 1990 have undermined long-term investments in the environment in consumer industries and bankrupted its economy, and squandered billions of dollars of public money. The increased militarisation and overall poor US economic performance has driven the US debt to US$30 trillion, US$7 trillion more than the country’s GDP of $23 trillion in 2021. The servicing of foreign debt costs the country US$300 billion a year.

The US spends more on the military, i.e., US$813 billion for the fiscal year 2022, which is more than the military spending of twelve large economies combined, including the UK, France, Russia, China, India, Iran, and Turkey.
The military-industrial complex puts profits before human lives and they have very strong lobby groups in the US government. These large corporations need conflicts and wars so that they can sell their weapons. To push such a policy, rising animosity toward Russia serves its purpose. There are huge profits to be made from wars with Russia. The defence industry is determined to continue to bleed the US economy and amass its obscene profits.

Moreover, international weapons manufacturers such as Raytheon Technologies, General Dynamics, Northrop Grumman, BAE Systems, Lockheed Martin, and Boeing will largely benefit from the rising demand for weapons. Military strategists, who claim the war will be protracted, are discussing infusions of 4 or 5 billion dollars a month in military aid to Ukraine.

The eastward expansion of NATO means building a military presence close to the Russian border (see the above map). The history of the last seven decades tells us that NATO is an aggressive military organisation, mainly used to serve US interests. It was created to control and isolate the Soviet Union, and with its collapse, it is still unclear why this offensive military organisation continues to exist. And what is the justification for billions of dollars wasted in military build-up rather than investing in improving the environment and reduction in CO2 gas emissions?

Since the collapse of the Soviet Union, NATO expansion has undergone two phases. The first was in 1999, when Poland, the Czech Republic, and Hungary joined NATO. The second expansion took place in 2004, with Estonia, Latvia, Lithuania, Romania, and Bulgaria becoming members of NATO. These three Baltic republics are also members of the European Union and the eurozone. At the time, the Russian government opposed it, but they were too weak to do anything regarding NATO expansion. At the Bucharest summit in 2008, NATO said that it welcomed the aspiration of Ukraine and Georgia to become members. The Russian foreign minister said that this would be a direct threat to Russia.

Alexander Grushko, then deputy Russian foreign minister, said, “Georgia’s and Ukraine’s membership in the alliance is a huge strategic mistake which would have most serious consequences for pan-European security” (cited in Mearsheimer, 2022b: 3). Putin has also stated that admitting Ukraine and Georgia to NATO would represent a “direct threat” to Russia. Imagine the US anger and concern if China built military bases around the US and made security alliances with Mexico and Canada.

In 2014, the “Orange Revolution” was projected by the West to promote democracy. The US involvement was clearly seen in 2013 when Ukrainian President Yanukovych was negotiating with the EU for integration with European markets. Russia did not like the fact that Ukraine signed a deal with the EU. To oppose the Russians, there were protests in the capital. Among the protestors were some fascist elements who wanted to install a pro-Western government in Ukraine. Then the rising violence, chaos, and protests forced President Yanukovych to flee to Russia. Police action against the protesters resulted in the death of hundreds of people. Instability and chaos rose after the global pandemic crisis hit its economy. In March 2014, a referendum was organised in Crimea, and Crimea’s parliament voted to join Russia soon after Crimea was incorporated into Russia (Mearsheimer, 2022a).

The US policy in Eastern Europe, including Ukraine, has three key elements. Firstly, NATO expansion means integrating Ukraine into the US-led military alliance. Secondly, Europe wants to integrate Ukraine into the economic institutions of the EU and make the country dependent on European markets and trade. Thirdly, the US wants to promote democracy in Ukraine. For instance, the US extended support to the “Orange Revolution”, which was a tool to topple the sovereign regime in Ukraine. In fact, in the name of spreading and promoting democracy, the US expects to benefit from such movements. Of course, Vladimir Putin and Xi Jinping do not like the call for democracy in their countries. The US believes that whoever was elected would be pro-US and would serve its global and strategic interests.


Neoliberalism and the International Monetary Fund (IMF)

The IMF has been trying to open up and integrate Ukraine’s economy with the West and it is suggested that foreign capital could play a leading role in the economic development of the country. This means further penetration of foreign capital into the country. Ukraine is advised to take further measures to “open up” its economy to attract foreign capital by adopting a more “investor-friendly” policy, such as incorporating a host of anti-working-class and anti-people policies, such as reduction in social expenditures, labour reforms, privatisation of public industries, and selling of natural resources to foreign companies. All these reforms were needed in order to get further financial support from the IMF. The mechanism that the IMF typically uses is the imposition of “conditionalities” for giving loans to countries that need balance of payments support (IMF, 2022b).

However, neoliberal globalisation, which relies on foreign capital investment for economic development in poor countries, is no longer seen as a means to upgrade national economies. Instead, it is mainly intended to open up developing countries’ economies for foreign capital and corporations, and provide opportunities for the West to impose its hegemony, in particular restrictions against technology inflows and outflows and constraints on third-country firms doing business in the target country and thus weakening the technological competitiveness of others.

It seems that NATO and the IMF, despite being two separate organisations, are working to promote and safeguard global financial capital interests and, in particular, the US. Under such conditions, Yanukovych’s turning to Russia rather than the IMF led to the orchestration of a US-sponsored coup, in which he was overthrown. This was carried out with the assistance of the extremist and ultranationalist forces who dominated the anti-Yanukovych protests. These ultra-nationalist and fascist elements have now become formally incorporated into the Ukrainian army.

The government that came to power after the 2014 coup restarted negotiations with the EU, and US$27 billion was promised from the IMF only after the implementation of a pro-market policy, including halving the gas subsidy to the people.

Far from being a facilitator of a dirigiste regime, the IMF has become a destroyer of the regime and an instrument for ushering in a neoliberal regime. It has become an instrument in the hands of international finance capital, enabling its penetration into every corner of the globe. But it is not just an instrument of international finance capital, but also of Western metropolitan powers that firmly stand in support of such policy.

Vladimir Putin is not opposed to the hegemony of international finance capital. His concern is only for Russian security and confined only to Russia not being surrounded by NATO forces. His offer of help to Yanukovych in place of IMF “assistance” arose only for this reason. He is critical of the role of the IMF as a promoter of US strategic interests, not the role of the IMF as a promoter of neoliberal capitalism in general.

The EU had also demanded that Ukraine implement severe austerity measures, which President Yanukovych was reluctant to accept and he finally refused a trade deal with the EU and looked towards Russia for help. Russia promised US$15 billion in loans and cheap gas but suspended that aid in response to the political instability.

The military-industrial complex puts profits before human lives and they have very strong lobby groups in the US government. These large corporations need conflicts and wars so that they can sell their weapons.

Ukraine’s trade in 2012 was almost equally split between Russia and the EU. However, since 2018, Ukraine’s trade with the EU has risen, while that with Russia has declined by 25 per cent, which has alarmed Russia. During the Soviet era, Ukraine was considered an economic powerhouse and had a very developed industrial sector. However, after the collapse of the Soviet Union, all its former republics witnessed a dramatic decline in their economies and incomes, including Ukraine. Until 1990, Ukraine was one of the key industrial regions of Europe, especially in the production of heavy machinery and manufacturing.

However, for the last three decades, there has been complete chaos, and industrial production in particular suffered heavily due to political instability, violence, and pursuing a “free-market” neoliberal policy aggravated the socio-economic crisis. For instance, machine and tool production declined by more than 28 per cent, and agricultural production also fell sharply. And as a result, unemployment rose sharply, especially among school leavers. Under such uncertainty, corruption rose sharply. Russia and Ukraine account for 30 per cent of all wheat traded worldwide. Since the invasion, wheat prices have increased between 50 and 65 per cent in commodities exchanges.

The economic decline and uncertainty led to the country’s population declining sharply and people started to leave Ukraine for other European countries in search of jobs. Moreover, the IMF asked the government to implement neoliberal reforms and, as a result, social sector expenditures were cut, particularly in healthcare, housing, and unemployment benefits. Ukraine’s foreign-currency reserves had been reduced to nearly US$12 billion, and the value of its currency, the hryvnia, suffered a huge fall.

A sizeable number of Russian-speaking people still live in the eastern part of Ukraine. The US and EU want Ukraine to be an integral part of the EU and even of NATO to counter the growing assertiveness of Russia. EU membership was said to solve all the problems of the people of Ukraine. The EU proposal was to integrate Ukraine with the EU by signing sweeping political and trade agreements.

Russia perceived the attempt to integrate Ukraine’s economy with the EU to be a direct threat to its economy and defence and it pressurised Ukraine not to join the EU. Instead, Russia tried to offer the country loans and gas prices at lower rates. The EU used propaganda to encourage people to protest against any possible deal with Russia. The far-right parties, ultra-nationalists, and other chauvinist parties and organisations actively campaigned against any close cooperation with Russia. They blamed all the problems the country was facing entirely on Russian involvement.

The US and the EU had done nothing beyond offering promises of help and advice to rely on the IMF’s neoliberal reforms, including the huge cuts in state subsidies for energy. In 2014, the IMF had clearly stated that it would not help unless Ukraine committed to undertaking austerity measures and premarket reforms (IMF, 2022b).

The current war is a dramatic effect of the growing imbalances and instability of the global economic and political order, together with other effects that this contribution analyses. This paper offers empirical evidence of rampant “global protectionism”, the slowdown of the world’s economy in the long term, and the changing structure of global value chains.

ukraine solidarityThe war in Ukraine could result in severe economic and political instability and possible large-scale, if not global, conflicts. Economic protectionism and trade wars are escalating. Global and local economic crises are slowing down the world’s economy and are opening up prospects for much lower growth rates than those experienced in past decades.

figure 4
Source: Defense Priorities, 2022.

The expected slowdown in the growth rate of the world’s economy is linked to the recurring debate on secular stagnation. Here, we make pragmatic reference to the baseline scenario built by the OECD in 2018 to predict the trend of the world’s economy up to 2060 (Guillemette & Turner, 2018). As it was put together some time ago, such a scenario does not take into account recent crises (e.g., COVID-19 and the Russian-Ukrainian war), so it projects the evolution of the economy neutrally, i.e., as if everything would be business as usual, assuming substantial stability of the structural factors in the absence of both exogenous shocks and new inventive policies.

The baseline scenario forecasts a decline in the world’s real GDP annual growth trend from about 3.5 per cent to -2 per cent in 2060 (Guillemette & Turner, 2018). Such a slowdown is mainly due to the deceleration of large emerging economies. The world’s economic centre of gravity is shifting toward Asia. China and India will take on a rising share of the world’s economy, eventually exceeding all the OECD countries together (Siddiqui, 2018a and 2018b). This slowdown will, in large part, be driven in the coming decades by demographics and productivity. The OECD report elaborates alternative scenarios that call for institutional and policy reforms to change the course of the world’s economy. However, it seems sensible, even if rather obvious, to argue that this trend could worsen even further, due to the epidemic and the recent war shock, with unpredictable consequences and an increase in international economic and political instability. Under these conditions, no historical determinism is justifiable.

China, Russia, Saudi Arabia, India, and other countries extract themselves from the tyranny of the US dollar and the SWIFT messaging that network banks, and other financial institutions use to send and receive information, such as money transfer instructions. Once the US dollar is no longer the world’s reserve currency, once there is an alternative to SWIFT, this will precipitate an internal economic collapse. It will force the immediate contraction of the US empire and the closure of most of its nearly 800 overseas military installations. It will signal the death of Pax Americana (Siddiqui, 2022b; 2019c).

The Rise in Defence Expenditure

US defence spending in constant US dollar terms today exceeds the annual outlays of the Cold War (Siddiqui, 2020b). For example, the US plans to spend US$813 billion next year, which is US$31 billion more than this year and US$43 billion more than the US planned for 2023 just a few months ago (see figure 4). This amount, adjusted for inflation, is more than any year during the Cold War, when the US faced an existential and ideological foe in the Soviet Union.

A decisive Ukrainian victory on the battlefield seems less likely. The Ukrainian army, despite help from NATO military and personal advisors, is not likely to take back the territories that Russia occupied in the beginning weeks of the war. During these past weeks, the war has shown that Ukraine will not be able to throw Russia out of Donbas or Crimea. That is not going to happen. The other possible outcomes of the war will be without a decisive Russian victory and, by decisive, I mean achieving their maximalist goals at acceptable, reasonable costs.

It means there is only one possible outcome: a negotiated settlement that will be in favour of the Russians. Ukraine is going to lose big chunks of Donbas and will also lose a big chunk of the Azov coastline, and the chances that Ukraine is going to recover the Crimean Peninsula also seem very remote. Ukraine will not achieve any of its war aims and will have to accept neutrality. If the trend lines simply play out over the next few months, Russia is going to get what it needs, if not what it wants: a neutralised Ukrainian state to act as a kind of buffer between it and NATO.

According to Professor John Mearsheimer, this war is about whose buffer state Ukraine will be – NATO’s or Russia’s. The most likely outcome of the war would be a status for Ukraine like that of Finland during the Cold War, when Finland was allowed to be neutral.

The war in Ukraine is a multi-dimensional disaster likely to worsen in the foreseeable future. Little attention is paid to its causes when a war is successful, but understanding how it happened becomes paramount when the outcome is disastrous.

First, the United States is principally responsible for causing the Ukraine crisis (The Guardian, 2004). This is not to deny that Putin started the war and that he is responsible for Russia’s conduct of the war. Nor is it to deny that America’s allies bear some responsibility, but they largely follow Washington’s lead on Ukraine. My central claim is that the United States has pushed forward policies toward Ukraine that Putin and other Russian leaders see as an existential threat, a point they have made repeatedly for many years. Specifically, I am discussing America’s obsession with bringing Ukraine into NATO and making it a Western bulwark on Russia’s border. The Biden administration was unwilling to eliminate that threat through diplomacy and, indeed, in 2021, recommitted the United States to bringing Ukraine into NATO. Putin responded by invading Ukraine on 24 February of this year.

Second, the Biden administration has reacted to the outbreak of war by doubling down against Russia. Washington and its Western allies are committed to decisively defeating Russia in Ukraine and employing comprehensive sanctions to weaken Russian power greatly. The United States is not seriously interested in finding a diplomatic solution to the war, which means it is likely to drag on for months, if not years. Ukraine, which has already suffered grievously, will experience even greater harm. In essence, the United States is helping lead Ukraine down the primrose path. Furthermore, there is a danger that the war will escalate, as NATO might get dragged into the fighting, and nuclear weapons might be used. We are living in difficult times.

It is widely and firmly believed in the West that Putin is solely responsible for causing the Ukraine crisis and the ongoing war. Putin is said to have imperial ambitions and is bent on conquering Ukraine (Walt, 2018; The Guardian, 2004).

Finally, it is worth noting that hardly anyone argued that Putin had imperial ambitions from when he took the reins of power in 2000 until the Ukraine crisis broke out on 22 February 2014. At the 2008 NATO summit in Bucharest, where the alliance announced that Ukraine and Georgia would eventually become members, Putin’s opposition to that announcement hardly affected Washington, because Russia was judged too weak to stop further NATO enlargement, just as it had been too weak to stop the 1999 and 2004 waves of expansion (Wolf, 2022).

It was only when the Ukraine crisis broke out in February 2014 that the United States and its allies suddenly began describing Putin as a dangerous leader with imperial ambitions, and Russia as a serious military threat that had to be contained (Wolf, 2022; Walt, 2018).

The Rise in Global Hunger

Due to the ongoing war in Ukraine, the foodgrain supply has stopped. The year 2022 is seen as a terrible year for the global food crisis. Not only has the world’s food output decreased. According to estimates, about 800 million people go to bed hungry every night. Due to the war in Ukraine, tens of millions of people are at risk of starvation and death.

figure 5a
Source: World Bank, 2022.

Since 2014, global hunger has been rising, as it brought rising food prices (see figure 5) and, as a result, rising prospects of looming global hunger. Over the past two years, the number of people without regular access to food has more than doubled. It is looking like a terrible year for global hunger. There was a series of bad harvests in recent years because of climate change, and all this disrupted food production. The shocks of climate change and the COVID-19 pandemic have meant that, according to estimates, the global supply of wheat, one of the most important carbohydrates, has fallen since the war. Ukraine’s food exports all but stopped, with 25 million tonnes of corn and wheat blocked inside the country. This is equivalent to the annual consumption of all the poor countries of the world. Ukraine’s food exports are very important to the global food supply. It amounts to the world’s largest country in terms of grain production. Most of the Gulf and North African countries import an average of half of their wheat and sunflower oil from Ukraine.

World food prices are set to rise. If a country imports from Ukraine and now has to import from other countries, such as Australia, Canada, and Argentina, for example, it will have to pay more because of extra freight charges, and also it will take more time to transport and deliver the food. All these extra costs will be passed on to consumers in poor countries. We are facing a food crisis with multiple causes. This is on top of an energy and fertiliser crisis and, as prices of both have risen in recent months as a result, farmers’ profits will fall because it would be more expensive. Or crop yields will fall because of the lack of availability of inputs. All these would then impact food prices for 2023, meaning a further rise in prices. In the US, rising food and energy costs have pushed inflation to its highest levels since 1981. In the UK, too, food prices are increasing, not seen since 2008.

Rising hunger will turn into mass discontent and protests, as happened in the past. In 2008, the rise in food prices saw riots in more than forty countries. Rising food prices and unemployment saw violence erupting on Arab streets, known as the “Arab Spring”. Today, a similar situation is arising again. In poor countries, poor people spend on average nearly 50 per cent of their total income on food and, if food prices rise, this would adversely impact the food consumption and nutrition levels of the population.

Following climate change and heat waves this year, many countries, including India, banned exports of wheat. In total, there are 23 countries that have now severely restricted food exports. The export ban could cause prices to rise further. Farmers may also hoard their food products in the hope of fetching higher prices until the ban is lifted, or switch to cultivating other crops. All these factors will raise prices for consumers.


We have examined here the implications of the war in Ukraine for the global economy. The prospect of mutual nuclear destruction constrains great-power war and has limited support for the war in Ukraine, especially among BRICS countries. The war demonstrates some limits of economic interdependence, which not only failed to pacify Russia, but also left Russia exposed to economic coercion, in a way both it and China may look to avoid in the future.

It appears that Ukraine will be destroyed, and the war has also increased the threat of nuclear war. The conflict in Ukraine is a colossal disaster, as I described earlier. Those who believe in facts and logic will quickly discover that the US and its allies are largely responsible for the conflict in Ukraine. For example, the NATO decision on April 2008 to invite Ukraine and Georgia to join NATO was certain to lead to conflict with Russia. The Bush administration was the principal architect of such policy. Since then Obama, Trump, and now the Biden administration have increased the military presence on Russia’s western borders. Even though Russian leaders made it clear that bringing Ukraine into NATO would be crossing “the brightest of red lines”, the US refused to accommodate Russia’s grave security concerns and instead moved relentlessly to make Ukraine a Western bulwark on Russia’s border (Siddiqui, 2022d).

At the end of the Cold War, the US assured Mikhail Gorbachev and Boris Yeltsin that NATO would not expand eastwards. The NATO expansion helps the weapons industries. All the evidence indicates that Russia was provoked. Clinton promised no stationing of troops along Russian borders. The US wants to prolong the war, which aims to weaken Russia’s economy. Recently the US has allocated US$55 billion to giving military assistance to Ukraine. It feeds the Pentagon and increases the profits of the weapons industry. The US wanted to lure Russia into war with Ukraine so its economy could be weakened and also help to remove Putin, just as the Soviet Union collapsed and its economy was weakened in the Afghanistan war.

This study has found that the tragic truth is that if the West had not pursued NATO expansion into Ukraine, it is unlikely there would have been a war in Ukraine today, and Crimea would still be part of Ukraine. In essence, Washington played a central role in leading Ukraine down the path to destruction. History will judge the United States and its allies harshly for their remarkably foolish policy on Ukraine.

We should not forget that Russia has been invaded three times in the past, and their concern is legitimate. On the Ukraine crisis, the West blames it entirely on the Russian attack. President Vladimir Putin annexed Crimea. It is claimed that he will also attack other Eastern European countries. It is further said that the ousted Ukrainian President Viktor Yanukovych in February 2014 merely provided a pretext for Putin’s decision to order Russian forces to seize part of Ukraine. But this account is wrong; the United States and its European allies share most of the responsibility for the crisis. In the Ukraine-Russian war, a decisive military victory for one country seems to be unlikely. The solution could be to try to find a compromise.

In fact, the war will increase the consumption of fossil fuels and destroy the environment, and the danger of nuclear war has risen. The West’s response to climate change is militarisation. There is a lack of policy and resources to halt the rise in global temperatures, curtail our reliance on fossil fuels, foster a plant-based diet, and curb profligate consumption.

The IMF should extend loans at lower rates to low-income developing countries, so that they can afford to import food grains and distribute them to people at affordable prices. A situation where countries remain dependent on a few countries for their food needs is highly unreliable. For example, only ten countries account for about 90 per cent of global food exports of key commodities like wheat, rice, corn, and soybeans. So if there is an unpredictable change in foodgrain output in these major food-producing countries (Siddiqui, 2021a; also 2015), for example due to wars, conflicts, and climate change, then the food situation would be disastrous for low-income countries. Therefore, low-income countries must try to become self-sufficient in food production, and national food security is crucial in order to safeguard their inhabitants from instability of food supply and prices. The present war in Ukraine threatens the world with unprecedented hunger.

About the Author

Kalim SiddiquiDr. Kalim Siddiqui is an economist specialising in International Political Economy, Development Economics, International Trade, and International Economics. His work, which combines elements of international political economy and development economics, economic policy, economic history and international trade, often challenges prevailing orthodoxy about which policies promote overall development in less-developed countries. Kalim teaches international economics at the Department of Accounting, Finance and Economics, University of Huddersfield, UK. He has taught economics since 1989 at various universities in Norway and the UK.


  • Guillemette, Y. and Turner, D. (2018) The Long View: Scenarios for the World Economy to 2060, Economic Policy Paper No. 22, July, Paris: OECD.
  • IMF (2022a) “How War in Ukraine Is Reverberating across World’s Regions”, Washington DC: IMF. (Accessed on 5 June 2022)
  • IMF. (2022b). “World Economic Outlook”, April, Washington DC: IMF. (Accessed on May 10, 2022)
  • Mearsheimer, J. (2022a) “Why the West is principally responsible for the Ukrainian crisis”, The Economist, London, 11 March. (Accessed on 16 June 2022)
  • Mearsheimer, J. (2022b) “Why the Ukraine Crisis is the West’s Fault” Foreign Affairs, September-October, p. 101-12. (Accessed on 26 May 2022)
  • Posen, B. (2022) “Hypothesis on the Implications of the Ukraine-Russian War”, Defence Priorities, 7 June. (Accessed on 16 May 2022)
  • Siddiqui, K. (2015). “Agrarian Crisis and Transformation in India”, Journal of Economics and Political Economy, 2 (1): 3-22.
  • Siddiqui, K. (2016). “Will the Growth of the BRICs Cause a Shift in the Global Balance of Economic Power in the 21st Century?” International Journal of Political Economy, 45(4): 315-38.
  • Siddiqui, K. (2018a). “U.S. – China Trade War: The Reasons Behind and its Impact on the Global Economy”, World Financial Review, Nov/Dec, p. 62-8.
  • Siddiqui, K. (2018b). “David Ricardo’s Comparative Advantage and Developing Countries: Myth and Reality”, International Critical Thought, 8(3): 1-28.
  • Siddiqui, K. (2019a). “Economic Transformation of China and India: A Comparative Political Economy Perspective”, Asian Profile, 47(3): 243-59.
  • Siddiqui, K. (2019b). “Financialisation, Neoliberalism and Economic Crises in the Advanced Economies”, World Financial Review, May-June, 22-30.
  • Siddiqui, K. (2019c). “The US Economy, Global Imbalances under Capitalism: A Critical Review”, Istanbul Journal of Economics 69(2): 175-205.
  • Siddiqui, K. (2020a). “The US Dollar and the World Economy: A critical review”, Athens Journal of Economics and Business. 6(1): 21-44.
  • Siddiqui, K. (2020b). “The Rise of the Chinese Economy and Growing Concerns in the United States”, World Financial Review, Sept/Oct, p.40-9.
  • Siddiqui, K. (2020c). “Prospects of a Multipolar World and the Role of Emerging Economies”, World Financial Review, Nov/Dec, 65-77.
  • Siddiqui, K. (2021a). “Agriculture, Sustainable Development, and the Government Policy in the Developing Countries”, World Financial Review, Jan-Feb, p. 44-59.
  • Siddiqui, K. (2021b). “Can 21st Century be an Asian Century?” Asian Profile, 49(1): 1-19, March.
  • Siddiqui, K. (2022a). “Problems of Inflation, War in Ukraine, and the Risk of Stagflation”, European Financial Review, April/May, p. 5-13.
  • Siddiqui, K. (2022b). “Capitalism, Imperialism, and Crisis”, European Financial Review, June/July, p. 16-32.
  • Siddiqui, K. (2022c). “The East Asian and Latin American Countries: The Role of Agricultural Reforms in the Economic Transformation”, World Financial Review, forthcoming.
  • Siddiqui, K. (2022d). “The New Cold War: Struggle for Global Domination”, Argumenta Oeconomica Cracoviensia, forthcoming.
  • The Guardian (2004) “US campaign behind the turmoil in Kiev”, 26 November, London.
  • Walt, Stephen M. (2018) “US grand strategy after the Cold War: Can realism explain it? Should realism guide it?” International Relations, 32(1): 3–22. (Accessed on 20 March 2022)
  • Wolf, Martin. (2022) “War in Ukraine is causing a many-sided economic shock”, The Financial Times, 26 April, London.
  • World Bank (2022) The Impact of the War in Ukraine on Global Trade and Investment, Washington DC, World Bank.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.