FILE – A pumping unit sucks oil from the ground near Greensburg, Kan. on March 6, 2012. The International Energy Agency says all 31 member countries have agreed to release 60 million barrels of oil from their strategic reserves “to send a strong message to oil markets” that there will be “no shortfall in supplies” as a result of Russia’s invasion of Ukraine. The IEA board made the decision Tuesday, march 1, 2022 at an extraordinary meeting of energy ministers chaired by U.S. Energy Secretary Jennifer Granholm. (AP Photo/Charlie Riedel, File)
WASHINGTON (AP) — Moscow’s war on Ukraine and the ferocious financial backlash it’s unleashed are not only inflicting an economic catastrophe on President Vladimir Putin’s Russia.
The repercussions are also menacing the global economy, shaking financial markets and making life more perilous for everyone from Uzbek migrant workers to European consumers to hungry Yemeni families.
Even before Putin’s troops invaded Ukraine, the global economy was straining under a range of burdens: Surging inflation. Tangled supply chains. Tumbling stock prices.
The Ukraine crisis both magnified each threat and complicated the potential solutions.
“We are actually in uncharted territory,” said Clay Lowery, executive vice president at the Institute of International Finance, a trade group of global banks. “We know there are consequences that we cannot predict.’’
For now at least, the damage to the overall global economy appears to be relatively slight, if only because Russia and Ukraine are not economic powerhouses. Important as they are as exporters of energy, precious metals, wheat and other commodities, the two together account for less than 2% of the world’s gross domestic product.
Most major economies have only limited trade exposure to Russia: For the U.S., it’s 0.5% of total trade. For China, around 2.4%.
Barring a major escalation of the war — far from impossible — “the effects on the U.S., China and most of the emerging world should be limited,” said Adam Slater, lead economist at Oxford Economics. He foresees only a 0.2% drop in global GDP this year.
Still, Russia is a vitally important supplier of oil, natural gas and metals, and higher prices for those commodities are sure to inflict economic damage around the world. Europe relies on Russia for nearly 40% of its natural gas and 25% of its oil.
For the European continent, Russia’s war has significantly heightened the likelihood of runaway inflation, another economic setback or both.
Here is a deeper look:
AN ECONOMIC SIEGE
For now at least, the damage to the overall global economy appears to be relatively slight, if only because Russia and Ukraine are not economic powerhouses. Important as they are as exporters of energy, precious metals, wheat and other commodities, the two together account for less than 2% of the world’s gross domestic product.
Most major economies have only limited trade exposure to Russia: For the U.S., it’s 0.5% of total trade. For China, around 2.4%.
Barring a major escalation of the war — far from impossible — “the effects on the U.S., China and most of the emerging world should be limited,” said Adam Slater, lead economist at Oxford Economics. He foresees only a 0.2% drop in global GDP this year.
Still, Russia is a vitally important supplier of oil, natural gas and metals, and higher prices for those commodities are sure to inflict economic damage around the world. Europe relies on Russia for nearly 40% of its natural gas and 25% of its oil.
For the European continent, Russia’s war has significantly heightened the likelihood of runaway inflation, another economic setback or both.
Here is a deeper look:
AN ECONOMIC SIEGE
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