New Delhi: The conflict at the Ukraine-Russia border is not over yet. Ukraine accused Russia on Wednesday of being behind a cyber-attack that targeted two banks and its defense ministry, which the country’s deputy prime minister said was the largest of its type ever seen.
The conflict between Ukraine and Russia means risk to the trade and investment of many countries. Trade relations of Ukraine with Asian and European countries are in billions and millions of US dollars. India is also trading with Ukraine in billions and millions of dollars.
The main items being imported by Ukraine from India are drugs, pharmaceutical production, ores and minerals, tobacco products, tea, coffee, spices, silk, and jute. The main items imported by India from Ukraine are chemicals, equipment, machines, and engines.
The volume of trade in services between Ukraine and India in 2020 amounted to 104.57 million USD. Exports of services from Ukraine to India decrease by 21.8% and amounted to 95.53 million USD, imports from India to Ukraine – 9.04 million USD (decrease by 5.9%). Ukraine had a trade-in service surplus of 86.49 million USD. The main services exported from Ukraine to India were travel and business services.
According to the media report, Crude prices have been above $90 per barrel for more than a week now. Tensions between Ukraine and Russia have been a major reason for the recent spike in crude petroleum prices.
However, a military conflict with Russia is bound to worsen the situation.
According to data from the US Energy Information Administration (US-EIA), Russia had a share of 12.5 to 13 percent in global crude oil production – almost half of the total crude oil production in the Organization of Petroleum Exporting Countries (OPEC) in the middle east (west Asia) region.
If crude prices stay at current levels, or worse, increase, even more, most of the budgetary calculations could become redundant as the government would face a triumvirate of economic challenges on the fiscal (it will have to cut taxes), inflation, and current account front.
The energy impact of a military conflict involving Russia will not be limited to crude oil prices alone. Western Europe is also dependent on natural gas supplies from Russia to a very large extent around 40 percent and disruption in supplies – which is what – will happen with a military conflict – will generate additional tailwinds for energy prices in Europe. This is bound to feed into global inflation. This again is bad news for India.