Wajeeha Najam
Countries engage in conflict or go to war in the modern era for various reasons. The primary motives include protecting national resources, maintaining regional influence, gaining control over shared resources, and preserving colonial rights, heritage, or values. However, in the case of Russia and Ukraine, the conflict between both has its roots in historical, geopolitical, and ethnic factors. One of the key events that triggered the conflict was Ukraine’s decision to pursue closer ties with the European Union in 2013. In 2014, pro-European protests in Ukraine led to the ousting of the pro-Russian president, Viktor Yanukovych.
Following these events, Russia annexed Crimea in a move widely condemned by the international community. The eastern regions of Donetsk and Luhansk declared independence also led to a conflict between Ukrainian government forces and pro-Russian separatists. The situation escalated, with accusations of Russian military involvement supporting the separatists. Despite several attempts at ceasefires and peace agreements, the conflict has persisted, causing a significant humanitarian crisis and displacing many people. The international community, including the European Union and the United States, has imposed sanctions on Russia in response to its actions in Ukraine.
The conflict remains a complex and sensitive geopolitical issue, with ongoing diplomatic efforts to find a resolution. The situation has broader implications for regional stability and international relations, impacting not only Ukraine and Russia but also countries and regions that have economic and political ties to both parties.
After the 2022 Russian invasion of Ukraine, oil prices exceeded USD$100 a barrel in March 2022. The invasion made it difficult for European oil marketers and oil companies to receive energy supplies from Russia, as Russia is the world’s second-largest oil producer and sells most of its crude to European refineries. The oil import ban placed on Russia during the invasion led to an energy shortage in Europe and a sustained rise in energy prices in the first half of 2022. Similarly, Gas prices for household use also increased due to fears of a disruption to global energy supplies. There were concerns that a retaliatory export ban on energy supplies to Europe and the rest of the world by Russia could plunge the world into a prolonged energy crisis, which could significantly reduce the global economic growth forecast, and plunge many European and non-European countries into a recession.
The disruptions in international trade highlighted the dependency of small economies in Europe on imports, especially of energy. These events may have changed Europeans’ attitudes towards globalization. The experience of economic instability due to close trade ties with Russia in the energy sector and with Ukraine in the food sector could strengthen citizens’ desire for national self-sufficiency and, thus, less dependence on international trade.
According to a World Bank report, the impact of the war in Ukraine on global trade and investment shows that world trade dropped significantly. Manufacturing exporters such as Vietnam, Thailand, and Mexico see a sharp decline, especially in energy-intensive sectors. Net exporters of crops, including Turkey, Brazil, and India, and of fossil fuels, such as Nigeria and countries in the Middle East, see a surge in their exports, attenuating the negative effects of the war. The economic shock waves are moving through five channels: commodity markets, logistics networks, supply chains, foreign direct investment (FDI), and sectors such as tourism.
Beginning with oil, Russia is a major player in global crude oil export, it accounts for 12 percent of global market shares. Due to economic sanctions on Russia, oil prices increased which directly hurt Pakistan from an economic perspective and led to an increased price of oil in Pakistan as well. Pakistan has historically had economic ties with both Russia and Ukraine. In 2020, Pakistan exported $279 million worth of goods to Russia, including citrus, non-knit women’s suits, and knit sweaters. Russia, on the other hand, exported goods worth $699 million to Pakistan, including wheat, dried legumes, and coal briquettes.
In 2023, trade between Pakistan and Russia improved with the launch of a direct shipping service. The first container ship from Russia berthed at the Karachi Port, opening a new sea route for direct shipping and enabling immediate access of Pakistani products to the Russian market. Payments are made through the local banking channel in Chinese Yuan, and the service is the result of an agreement between Pak-Shaheen (Private) Limited and the Russian express liner service Neco Line.
On the other hand, Ukraine exported goods worth $573 million to Pakistan in 2020, including light synthetic cotton fabrics, citrus, and rice. Pakistan exported goods worth $82.1 million to Ukraine in the same year. The crisis is expected to lead to higher inflation and potential depreciation of the Pakistani rupee, negatively affecting living standards. To prepare for potential economic challenges, Pakistan can consider measures such as utilizing local coal for electricity production, reducing subsidies on petrol and diesel, implementing temporary bans or higher duties on luxury imports, arranging oil credit facilities, and promoting the reduction of non-essential travel.
Despite all, Pakistan should also focus on strengthening its agricultural sector, as the country’s economy is predominantly agricultural. By becoming more self-sufficient in food production, Pakistan can mitigate the impact of rising global food prices caused by the war. In terms of geopolitics, Pakistan should seek to improve its relations with Asian countries and maintain mutually beneficial relationships with major powers such as the United States, Europe, China, and Russia and needs to carefully assess its strategic position and make informed decisions to navigate these challenging times while prioritizing its agricultural sector and self-sufficiency.
The author is a Research Officer at Rabita Forum International (RFI).
