Real Instituto Elcano
Efectos económicos y geopolíticos de la invasión de Ucrania

New geopolitical and economic balances after the invasion of Ukraine

Real Instituto Elcano reviews the economic and geopolitical effects of the Russian invasion of Ukraine, describing the birth of the 'Global South' concept, as a group of emerging countries ranging from China to India to South Africa, and several countries in the Middle East and Latin America, all of them with a different vision from the Western one, promoted by Washington and Brussels, in relation to the war in Ukraine. In its view, the redefinition of the new geopolitical chessboard is far from over. Thus, states, companies and citizens are forced to be especially cautious in navigating the new international economic and political reality.

Main conclusions of the analysis:

  • Russia's invasion of Ukraine is upending trade and financial globalization and rewriting global geopolitical balances. The war in Ukraine could generate problems in the global economy, especially in commodities, energy and value chains already under stress in the aftermath of the pandemic. 

At the economic level, two types of effects are occurring:

  • First-round effects, arising from restrictions on energy products, foodstuffs and raw materials whose scarcity (or expectation of scarcity) drives up their prices, undermines the production system and threatens growth and social stability.  Russia is the world's second largest oil and gas producer.  Ukraine and Russia account for 30% of world wheat exports and 18% of corn exports.

  • Second, on general inflation (via energy and food prices) and interest rates, which drive up corporate financing costs and threaten the sustainability of public finances. 

In the geopolitical field, a new configuration of international alliances is beginning to be outlined, the emergence of the so-called "Global South" (less aligned with the West than is often thought from Europe). 

  • This "Global South" sees the war in Ukraine differently from Washington or Brussels, under the rise of China and India and the growing multipolarity of the international economic and financial system.

    For almost all of these countries the war is unfortunate, and it would be desirable for it to end as soon as possible, but what really matters to them is to prevent it from generating an economic slowdown or serious social unrest resulting from rising prices that some blame on Western sanctions rather than the invasion itself.

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