The Effect of The Russian War in Ukraine on Poverty

According to a report by the United Nations Development Program (UNDP), the Russian war in Ukraine has prompted a surge in food and energy costs, pushing approximately 71 million people into poverty worldwide. The global food crisis is among the farthest-reaching consequences of Russia's war in Ukraine, contributing to widespread starvation and poverty across Africa, Asia, Eastern Europe and the Middle East. The outbreak of war in Ukraine has also caused a worldwide energy crisis. According to the World Economic Forum, global household energy costs have nearly doubled due to the rise in fuel prices.

It took within three months of the Russian invasion for 71 million people to fall into poverty, surpassing the economic impact felt during the peak of the pandemic. As of April 2023, the Russian war in Ukraine has catapulted millions into poverty worldwide, driving the global extreme poverty rate to 9.2%.

Before the war, Russia was the world's largest exporter of natural gas and crude oil, and Russia and Ukraine together accounted for a substantial portion of global wheat, corn and sunflower exports. Many know Ukraine as the "breadbasket of Europe" as it is among the world's top three grain exporting countries.

Blocked ports have jeopardized low-income countries that rely on Russian and Ukrainian exports. Some of the affected countries include Burkina Faso, Ghana, Kenya, Rwanda, Sudan, Sri Lanka, Uzbekistan, Pakistan, Haiti and Armenia.

Households in low-income countries allocate a significant proportion of their income (approximately 42%, according to AP News) to food expenses. The International Monetary Fund (IMF) estimates that in Azerbaijan, Tajikistan and the Kyrgyz Republic, food costs can account for up to 70% of household spending. The skyrocketing prices of wheat, sugar and cooking oil due to sanctions imposed on Russia by Western countries have caused an additional financial strain on these families.

The Russian military has destroyed Ukrainian grain storage facilities, and many Ukrainian farmers have joined the army or left their land. Russian attacks on the energy grid have shut down nitrogen fertilizer plants. Transportation costs have soared, and shipping costs have doubled. Also, due to banking limitations and insurance expenses, Russia has stopped selling fertilizers, and this continues to affect farmers around the world.

Historically, Russia has been a major exporter of natural gas to Europe, but the international sanctions targeting the Russian energy sector have led to supply limitations which have boosted prices. Moscow has limited its exports, further driving up costs elsewhere. Vulnerable households tend to rely more on purchasing energy-intensive goods and services. The rise in energy prices has made households more vulnerable to energy poverty, which is especially dangerous in winter.

While the rise in the cost of groceries and gas can be frustrating in wealthy nations such as the U.S. and the U.K., the impact of rising food and energy prices and disrupted supplies can be life-threatening in developing nations. The rate of price increase varies across regions, ranging from 60% in the U.S. to 1900% in Sudan, with the Middle East and North Africa taking the most hit. As both Russia and Ukraine are major exporters of wheat, the war poses a serious threat to countries that heavily rely on grain from both countries for their staple foods. Some of the affected countries include Lebanon, Bangladesh and the Democratic Republic of the Congo (DRC). Other countries, including Uzbekistan, Sri Lanka and the Kyrgyz Republic, do not have adequate resources to deal with the hunger crisis due to their debt burdens.

Following Russia's invasion of Ukraine, the price of fossil fuels sharply increased. According to the World Economic Forum, between February and September 2022, the cost of coal rose by 176%, crude oil and petroleum products increased by 51% and natural gas prices rose by 94%. This has increased global household expenditure by between 2.7% and 4.8%. Countries like Rwanda have been significantly affected, with household energy costs increasing up to three times the global average.

Russia's military operations in Ukraine have had a major impact, causing Ukraine's exports to go down from their average before the war of 5 million to 7 million metric tons of grains and oilseeds per month to an average of 3.5 million metric tons from March to November. Russia has blocked 7 of 13 ports that Ukraine uses, severely limiting shipping potential.

UNDP suggests that targeted cash transfers are more equitable than blanket energy subsidies, which may only provide short-term relief and reward the wealthier population. Cash transfers primarily assist the poorest 40% of the population whereas energy subsidies mainly benefit affluent individuals, with more than 50% of the benefits favoring the wealthiest 20% of the population. Additionally, a two-year debt moratorium could assist all developing countries, regardless of their GDP per capita.

The Russian war in Ukraine has catapulted millions into poverty worldwide, highlighting the urgent need for global cooperation to alleviate the horrors of war. The measures proposed by the UNDP have the potential to bring stability and improve the living conditions of millions affected by the war-induced food and energy crisis.

– Skye ConnorsPhoto: Flickr