Keon Clark M.

Lanto BS Accountancy (ACC221)

THE CONNECTION BETWEEN THE UKRAINE-RUSSIAN WAR AND THE PHILIPPINES'

ECONOMY AND ITS EFFECT TO THE LIVELIHOOD OF FILIPINOS

I. INTRODUCTION

The war that arose between Ukraine and Russia during the early 2022 testified to a
contemporary world disorder and is a devastating news that brought global economic
crisis. These indicate that the diplomatic ties between the two countries is non-existent
which is not totally unexpected. Russia and Ukraine's relationship were already fragile way
back in 2014. In January of 2021, the Ukrainian President Zelensky's requested to be
accepted and be part of NATO which provoked Russia and eventually deployed their
troops at their borders disguised as training exercise which caused great tension between
the two countries and eventually led to Russian's special military movement towards
Ukraine (Wiseman, 2022).

Due to several modern democracies exploiting the situation to threat to impose and
enforce dramatic sanctions in a chance of making the Russian President Vladimir Putin
change his plans and course of action, it has led the authoritarian leader to designate
those countries as an unfavorable country. Given that the United Nations has no restriction
law that can bind Moscow from its invasion towards Ukraine, unfolding a new discussion is
the course of action they took to talk about whether the international system should
transform for better or for worse. The results of this discussion are reflected through the
issuance of the United State President Joe Biden of an executive order that limits trade
and financial transactions from Ukraine and Russia and the blocking of assets of Russian
financial institutions. The prevailing perception around the world is that the global financial
sanctions to President Putin's oligarch friends, will weaken the Russian economy and
thwart any further attack on Ukraine. This is the rational situation however the crisis' impact
extended to the global economy and eventually lead to Philippines which directly affected
their economy and the livelihood of its citizens.

During the six years term of the former Philippine President Rodrigo Duterte, the
country has managed to diversify its relations with countries that is outside its traditional
 partners, such as China and Russia. This resulted to Philippines ruining its long-term
partnership with U.S strategic relations. Moreover, during Duterte's term the Philippine-
Russian relations have significantly improved and managed to close some deals that is
vital for the Philippines' economy. According to academics, the relationship is likely to
continue, and poses a chance for a significant growth and a by-product that might be
useful for the Philippines' structural shift toward a multipolar order.

The impact of the recent war between Russia and Ukraine to the future trajectory of
economy is very evident. Though the relationship of Philippines between those two
countries is not too tied up. During the previous presidential term, they are unable to attain
the full potential o bilateral relations, so the relations are unlikely to collapse from a huge
fall. In spite of this relation, there are still existing adverse impacts that this European crisis
pose in short and long term.

II. DISCUSSION

The tension that brewed in Ukraine concluded after the Russian military forces
commenced an operation last February 2022. These two belligerent nations are halfway
across the globe and were confine regionally, but the crisis they impose had direct effect
on the livelihood of the Filipinos and became even more destructive. Though the
government authorities have assured Filipino that the impact is minimal especially that
Philippines' ties between the two countries are not confined so there are narrow trade and
banking exposure, “Remittances from the conflict zones are also small compared to
inflows from the rest of Europe and the world” (Wiseman, 2022).

What does the invasion of Russia towards Ukraine mean for the Economy and
Livelihood of Filipinos?

Economy

With the recent invasion attempt of Russia on Ukraine and intense economic impact
on Russia due to financial sanctions released on it, “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”
(Wiseman, 2022). This crisis between Ukraine and Russia is a world economic trigger as
they are major suppliers of several major products combined such as wheat, gas, metals,
and etc. Russia-Ukraine crisis did not directly affect the local economy since neither
country is a major trading partner of the Philippines (Dominguez, 2022). These unintended
impacts are felt through four major sectors such as the commodities market, financial
sector, stocks, and the effect on the country's fiscal health.

Simply put, the collective indirect impact of the Ukraine-Russia conflict would slow
the Philippine economic recovery. While we do not directly trade with Russia or Ukraine,
the consequences of their actions can have an impact on us. Our country's worst-case
scenario is economic collapse. The impact of the war, according to Finance Secretary
Carlos Dominguez, Philippine economy is the collateral damage.

Livelihood of Filipinos

In a report issued by world bank, the multilateral lender said that while the
Philippines' dependence on Russia and Ukraine in terms of goods and services, and the
capital is limited, the sanctions related to the invasion forced up international prices of
food and fuel, which devastated consumers' livelihood and economic growth. The first
sector that is greatly affected is agricultural, given that the two warring countries are major
wheat supplier. In the Philippines, according to World Bank estimations, if wheat prices
rose 10% on average over the year, poverty incidence would rise by one percentage
point, or 1.1 million people. These are people who have a daily income of $3.20 (P163.81)
or less.

Due to financial sanctions and the limitation of trade between the two regions, the
supply of wheat products greatly declined which caused significant increase in prices and
impact citizen's income. This was also noted by the World Bank, stating that “As we would
expect, relatively import dependent Philippines, China, and Thailand, see a contraction in
real income – of between 0.5% and 1.5% – while the net exporter, Malaysia, sees an
increase in real income of 0.3%.” These sudden changes caused inconvenience to
consumers and forced them to find alternatives to fulfill their basic commodities. (Rivas,
2022).

Knowing that Russia is known as the ‘world's largest supplier of wheat and in
combination with Ukraine, both countries account for almost a quarter of the sum of the
global export (Cohen & Ewing, 2022). People suffer from acquiring wheat goods as its
 price increased greatly. The natural gas supply in the country is arguably the most afflicted
sector as it is evident as the prices of gas prices increase continuously. It is fostered and
raised in the senate, “22 percent increase in gasoline prices to Php 77.71 per liter in May
from PHP 63.58 per liter in January and diesel pump prices soared by 49 percent to 75.92
per liter in May from PHP 50.95 per liter in January (Gatchalian, 2022).” During this crisis,
many public utility drivers decided not to comply to the prescribed fare in jeepneys, bus,
and even tricycles and some decided to halt their operations overall which caused a
commotion to daily commuters. Moreover, these circumstances affected businesses that
incorporates gas such as food stalls and restaurants, which pushed them to increase their
pricing for the services and products they offer (Rivas, 2022).

Given that there is a conflict between Ukraine and Russia, does the former
President Rodrigo Duterte's decision to pursue diplomatic relationship with Russia still
convenient?

The relationship between Philippines and Russia is unlikely to crumble from a huge
foundation mainly because the existing connection between the two is not deeply tied
together. This is despite the truth that the ongoing crisis had a negative impact on the
Philippines. First, the Russian government lack definite power to directly influence the
Philippines and only have a soft bilateral connection with one another. As of now, the
Philippines has decided: it condemned Moscow's invasion of Ukraine at the UNGA and
urged both parties to resolve their differences peacefully. Former president Duterte has
admitted that if the conflict "spills over" into Asia, he is willing to offer US facilities in the
archipelago.

The Philippines faces no high-stakes fallout from the Ukraine conflict in its bilateral
relations with Russia. While Manila has made a "moral decision" to condemn the invasion,
this decision is consistent with its strategic interests. It is crucial to recognize trends in how
nations like the Philippines act in a way that preserves the Thucydidean principles of fear,
honor, and interest as the ongoing Russo-Ukrainian War leads to systemic changes on a
global scale (Espeña, 2022).

III. CONCLUSION
 The study examined the global and Philippine economic impact of Russia's invasion
of Ukraine. This implies that the invasion's impact on the world economy was a disruption
of the worldwide supply chain. Disruptions to the trade and energy supplies made this
obvious. It caused an increase in the cost of energy, commodities, and food, which in turn
caused an increase in worldwide inflation in several nations. The implication is that
geopolitical conflicts frequently have economic effects that spread to other nations and do
not only affect the sanctioned country. The conflict between Russia and Ukraine has
demonstrated that imposing sanctions on a belligerent nation is not the best course of
action because it affects non-belligerent nations as well, particularly when those non-
belligerent nations are trading partners with the belligerent nation.

Economy. Such is the case in the Philippines, even though the relationship with the
country to the warring nations in the west is not that connected deeply. The war between
Ukraine and Russia will have a cumulative indirect effect that will hinder the Philippine
economy's recovery. A negative impact on the economy is the worst-case scenario for the
nation. The crisis has heightened geopolitical concerns, which will have a negative impact
on the Philippines' economic situation in 2022. Several models predicts that these effects
will have a considerable negative impact on GDP and a positive impact on inflation,
aggravating the trade-offs in Philippine policy.

Livelihood of Citizens. The terror of the conflict and the aftermath it has brought is
greatly felt by the Filipinos. The projected poverty rate increased to a notable amount
enough to make the government prepare intensive precautionary measures for the worst
possible scenario. Moreover, many consumers are suffering the consequences of the
increase in wheat products forcing them to find and settle for alternatives that they can
afford. Price increases for essential commodities are another domino effect of rising oil
prices. While we may have safety nets in the short term, the protracted conflict casts
doubt on our economy's future and the faith of consumers.

IV. RECOMMENDATIONS

With the data and findings taken into consideration, the following suggestions
present recommendations for future activities:
 1. Political leaders should make an effort to prevent crises like the one between
Ukraine and Russia and should adopt discussion as a method of resolving
disputes.
2. If Russia chose to respond by punishing the west with export restrictions,
policymakers in the Philippines, which heavily depends on Russia for essential
commodity imports, should begin discussions on alternate means of survival and, if
feasible, support "onsite" production of commodities.
3. Future research can evaluate how well discussions can settle disputes and
appease nations who start wars to maintain their regional influence.
4. Further research could focus on the political and socio-political aspect of the crisis.

V. REFERENCE

Cohen, P., & Ewing, J. (2022, February). What’s at stake for the Global Economy as
Conflict Looms in Ukraine. The New York Times.
https://www.nytimes.com/2022/02/21/business/economy/ukraine-russia-economy.html

Dominguez, C. D. (2022, March 8). Effects of Russia-Ukraine conflict temporary,

measures in place to cushion its impact. Department of Finance.
https://www.dof.gov.ph/effects-of-russia-ukraine-conflict-temporary-measures-in-place-
to-cushion-its-impact-dominguez/

Espeña, J. (2022, March 25). How the Russia-Ukraine War Will Impact Philippines-
Russia Relations – The Diplomat. The Diplomat. https://thediplomat.com/2022/03/how-
the-russia-ukraine-war-will-impact-philippines-russia-relations/

Gatchalian, Sen. W. (2022, August). Impact of Russia-Ukraine war on PH energy

Assessed. Philippine News Agency. https://www.pna.gov.ph/articles/1180613

Ozili, P. K. (2022). Global Economic Consequence of Russian Invasion of Ukraine.

SSRN Electronic Journal. Published. https://doi.org/10.2139/ssrn.4064770

Rivas, R. (2022, April 5). Russia-Ukraine war may worsen poverty in Philippines – World
Bank. Rappler. https://www.rappler.com/business/world-bank-sees-russia-ukraine-war-
likely-worsening-poverty-philippines/
Wiseman, P. (2022, March 2). Economic dangers from Russia's Invasion ripple across
globe. AP NEWS. https://apnews.com/article/russia-ukraine-vladimir-putin-coronavirus-
pandemic-business-health-9478a9825c9abfde5f6505bd34b2998c