Russian-Ukrainian conflict: what possible effects on major economies?

Russian ground forces entered Ukraine on Thursday, February 24. The first instinct in France is obviously to look at oil and gas. Regarding black gold, Russia is now the world’s second largest exporter of Crude behind the United States and before Saudi Arabia, enough to drive prices up. Which is the case this morning with a barrel of oil that exceeds 100 dollars.

Nothing good for the price of fuel at the pump, especially since this Russian-Ukrainian conflict comes at a time when the world economy is picking up again, with soaring demand for crude oil and therefore the upward impact on Classes.

The European Commissioner for the Economy, Paolo Gentiloni, recognizes that the Russian offensive on Ukraine greatly increases the uncertainty surrounding the economic situation on the Old Continent. On the growth side, some industrial sectors will continue to suffer from the already real rise in energy prices. And the inflation generated by energy prices will cause central banks to intervene and most likely raise interest rates faster than expected, which could dampen investment.

Not to mention the purchasing power of households weighing on consumption. One of the fears concerns cereals for the food industry. Ukraine is called the granary of Europe – the Donbass today produces 40% of the national wheat – with, in the background here, the production of bread, baguettes and pasta in particular.

Independently of energy issues, on the commercial level, the French economy is not very exposed to Russia and retaliatory measures on the part of Moscow to Western sanctions would have little direct effect. This is barely 1% of our exports (seven billion euros per year) and less than 2% of our imports (ten billion euros). We import more from Russia than we export to that country. Russia is France’s 7th largest market outside the European Union.

There are about 500 thFrench companies established in Russia, including 35 groups from the CAC 40, the flagship index of the Paris Stock Exchange. TotalEnergies, Renault, but also companies like Auchan for a total of 160,000 French employees. Overall, the economic impact should still be limited, in any case, in no way commensurate with what the major world economies have experienced in the past two years with the Covid-19 pandemic.

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