When Russia receives continuous and tighter sanctions, and it keeps retaliating, commodity exchanges will meet its point of worse chaos. Wheat supplies today are the biggest commodity shock since the first world war. Energy, metals, and food are more savage. Just three months after the first price surge, now it reaches 26% these days. World’s household commodity is on greater disruptions.
If the world remembers Sadam Hussein’s army from Iraq into Kuwait in 1990, the cost of a barrel of Brent is wilder than this. London has been halted to the crazy price of nickel. Then, China suffered multi-billion-dollar losses. These are the impacts when the world’s biggest exporter like Russia faces sanctions and isolation.
Striking deals carrying Russian cargoes leaves piles of unsold industrial metals and vessels full of unwanted Urals crude, said The Economist. It happens because Western sanctions made Russian lenders and insurers wary of shipping fate. Shell for instance stopped buying Russian crude oil. Vessels cannot pass the Black Sea due to missiles. Ukraine’s agriculture might also stop producing due to the war on Ukraine’s field.
Practically, countries often suffer from food shortages due to export prohibition, it simply will break down global trade. Crude oil issues will affect 5% of global supply, leading it to reach $200 per barrel. Poor countries will suffer household commodities shortages and food-price spikes.
Rich countries on the other hand can pump more oil supply.
They can speed up to 1.5bn barrels of oil. The EU can also stock up on gas for winter. They prolong the use of nuclear, renewable, and coal-powered generation, reported The Economist. Stimulus might mean another risk of higher interest rates or taxes, but this is worth taking actions to protect the poor.
The West must at least take further action to strengthen the global financial safety-net. Tumbling currencies and balance-of-payment cases have been hurting food and oil importers. The IMF and The Federal Reserve could help poor countries by giving them more access to hard-currency loans.
