The Economic Impact of the Ukraine–Russia War

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Author: Madeline Rae

Pub. Date: 2022
Product: Sage Business Cases
DOI: https://doi.org/10.4135/9781529609059
Sage Sage Business Cases
© Madeline Rae 2022

Keywords: war, Russia, Ukraine, students, economics, labor migration, conflict

Disciplines: Supply Chain Management, Operations Management, Economics (general), Economics, Global
Economy, International Business & Management, Business & Management
Access Date: January 2, 2024
Publishing Company: SAGE Publications: SAGE Business Cases Originals
City: London
Online ISBN: 9781529609059

© 2022 SAGE Publications: SAGE Business Cases Originals All Rights Reserved.

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Abstract

This short case covers the broad economic impact that is being felt worldwide after Russia’s invasion
of Ukraine in February 2022. With shifts in labor migration, supply chain disruptions, and skyrocketing
prices across myriad commodities, many nations are faced with the difficult task of navigating around
and preparing for continued economic challenges. Students are asked to discuss these challenges
and to identify the areas of global economic impact.

Case

Learning Outcomes

Students should apply learning in economics, supply chain management, and the global business environ-
ment to discuss the economic impact of war in Europe.

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Note: Ukrainian refugees walk across a bridge at the buffer zone with the border with Poland in the border
crossing of Zosin-Ustyluh, western Ukraine on March 6, 2022. Over 1.5 million refugees fled Ukraine in the
week following the invasion by Russia on February 24, 2022, with over half going to Poland, according to the
UN refugee agency.

Source: Photo by DANIEL LEAL/AFP via Getty Images.

The Issue

In February 2022, Russia invaded Ukraine, launching military strikes across the country. The two nations are
still in active conflict while the rest of the world watches. In response, many Western countries have levied
economic sanctions against Russia, focusing on Russia’s energy sector and supply chain.

Over 4 million refugees have fled Ukraine since Russia first attacked, leading to an immigration crisis and
disruptions in the global labor market. Corporations with branches in Ukraine largely shut down offices and
many ensured their workers were safely sent to the Polish border when the conflict began, but shifts in labor
migration are already being felt.

The Czech Republic reports that if Ukrainians are called up for active duty, a large percentage of their workers

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(mainly in the construction industry) will be forced to return to Ukraine, crippling the Czech labor market.
Ukraine’s IT sector has been booming the past several years, with companies around the world outsourcing
tech services to Ukrainian companies. There are an estimated 85,000–100,000 export services workers in
Ukraine, mainly in the software engineering and IT industries. Even if those workers were able to remain in
the country, up to 80% of them report regular Internet and power outages due to the war, severely impair-
ing their ability to work. It’s still unclear how the influx of refugees will impact labor migration to the E.U., but
Russian companies are already experiencing layoffs due to economic sanctions.

The price for commodities has continually increased since the invasion began, keeping inflation rates higher
for longer and making growth slower amid heightened uncertainty. These new inflation rates affect the world’s
economy, causing a problem for many nations’ central banks. The International Monetary Fund cut its 2022
growth estimates for the world by 0.5% percentage points while raising the consumer inflation estimate for
advanced economies by 1.6%. Even if the conflict were to end today, further spikes in energy prices could
lead to a continued downward revision of these growth estimates and a raising of inflation expectations.

Why Is It News?

Within just a few days of the invasion, the global economic outlook darkened as energy inflation spiked and
supply chains—already lagging because of the COVID-19 pandemic—were further overloaded. In the spot-
light, of course, is oil. Although just 11% of the world’s crude oil supply comes from Russia, prices at the pump
soared as countries began taking steps to distance themselves from Russian petroleum. The United States
announced an immediate ban on Russian oil while the U.K. agreed to phase out Russian petroleum by the
end of 2022. India has been taking advantage of these sanctions, buying millions of barrels of Russian oil at
steep discounts. Western countries have warned, however, that India itself may face consequences if it con-
tinues to help Russia dodge these sanctions.

Besides affecting energy, the conflict disrupts a number of important commodities in the global supply chain.
From Russia, exports of raw materials like titanium and palladium are hitting manufacturers hard. Perhaps
even more dire is the impact on neon.

Around 90% of the world’s neon is made as a byproduct from Russia’s steel manufacturing. Much of this raw
neon is then distilled and refined in Ukraine, from where it is exported around the world for use in semiconduc-

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tors (such as computer chips and microprocessors), which are already in high demand and short supply since
the start of the pandemic. Roughly 45–54% of the world’s semiconductor-grade neon comes from Ukraine.

The threat to the global food supply is less central in the news, but perhaps far more alarming. Together, Rus-
sia and Ukraine grow almost 30% of the global wheat supply, as well as a very large percentage of vegetable
oils (80% of sunflower oil comes from the region). Ukraine is also the top supplier of corn for China, while
Russia supplies most of Turkey’s and Egypt’s grain needs.

The conflict has already raised prices and disrupted supply for these commodities, as it can be difficult to tend
a farm in an active war zone. Economic sanctions against Russia are further driving up costs, while trade
sanctions will make it difficult for farmers around the world to get their hands on some key ingredients in fer-
tilizers (exported mainly by Russia), which would allow them to alleviate local food insecurity issues. Experts
are seriously concerned whether or not people in low-income countries, particularly in the Middle East and
Africa, will be able to afford basic foodstuffs in the coming seasons.

Discussion Questions

1. What specific industries are being impacted by this war?

2. How is the war affecting each of these industries?
3. What strategies could be put in place to potentially alleviate some of these impacts?

https://doi.org/10.4135/9781529609059

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