The Russia-Ukraine Conflict has a significant impact on the global economy. This conflict can be considered the most severe security crisis in Europe since World War II. What exactly will be the impact on the global economy? Ukraine is the world’s largest supplier of neon gas, which is used in various steps of chip production. If there is a shortage of neon gas supply, it will influence the semiconductor supply chain.
The Russia-Ukraine Conflict not only affects Taiwan’s industries and trade circles but also impacts the oil we use and the raw materials we consume in our daily lives. Shortages can lead to inflation, thus increasing the daily consumption costs for people. Before delving into the details of these impacts, let’s first understand the origins of the Russia-Ukraine Conflict.
The Reasons Behind the Russia-Ukraine Conflict
According to BBC reports, the reasons for the conflict between Russia and Ukraine can be summarized as follows:
(1) Ukraine’s Friendly Relations with the West
Ukraine’s increasingly friendly relations with Europe and the United States have led Russia to seek to regain control over Ukraine in an attempt to reverse the situation.
(2) The Crimea Conflict of 2014
In February 2014, Russia deployed troops and subsequently occupied Crimea, a territory recognized as part of Ukraine, on March 18. The Russian government immediately established the Republic of Crimea and the city of Sevastopol as federal subjects within the Russian Federation. Ukraine disputed this action, as it does not recognize the independence of the Republic of Crimea or its annexation by Russia as legitimate. The United Nations General Assembly also refused to recognize the referendum and occupation, affirming the “territorial integrity of Ukraine within its internationally recognized intact borders.
(3) Ukraine’s NATO Membership and the Expansion of the Western Sphere
Looking at the map, it is evident that the countries currently connecting Russia and Europe are the Baltic States, Belarus, and Ukraine. These regions serve as vital strategic locations during conflicts between Europe and Russia, as they are key transit routes. Therefore, they hold significant strategic importance.
If these regions maintain their independence, they can act as a military zone between Europe and Russia. However, if these regions lean towards Russia, they could become springboards for Putin to launch attacks on Europe.
Similarly, if these regions align with the West, Europe could launch attacks on Moscow at any time. Thus, if Ukraine joins NATO, it would provide Western countries with another route to attack Russia. From Putin’s perspective, failure to prevent this would undoubtedly leave Russia in an extremely perilous situation.
(4) Putin’s Desire to Boost Domestic Approval Ratings
Putin’s popularity has notably declined in recent years. The last peak in his approval ratings was when he deployed troops to seize the Crimean Peninsula. While “aggression” is how foreign countries perceive Russia’s actions, launching a war against Ukraine and using the pretext of protecting overseas compatriots as a reason for military intervention will undoubtedly make Russian military and civilians see themselves as defenders of justice. Consequently, this move could enhance Putin’s standing among the Russian people.
References:
Videos: What’s led to the conflict between Russia and Ukraine?
Article: Ukraine: Conflict at the Crossroads of Europe and Russia
The Impact of the Russia-Ukraine Conflict on Economic Trade
Ukraine is a major supplier of semiconductor raw materials and the world’s largest supplier of neon gas. It is involved in every stage of semiconductor production, from manufacturing to packaging. According to research by Wanlian Securities, Ukraine supplies approximately 70% of the world’s neon gas, about 40% of krypton gas, and 30% of xenon gas. Both neon and krypton gasses are used in KrF lasers, which are primarily used in the production of 8-inch wafers with mature processes ranging from 250 to 130 nanometers.
Recently, two Ukrainian companies, Ingas and Cryoin, which supply nearly half of the world’s neon gas, have ceased operations due to intensified Russian aggression, leading to fears of a significant increase in neon gas prices and exacerbating the semiconductor shortage issue.
Market research firm Techcet released a report on February 1st this year, stating that over 90% of the semiconductor-grade neon gas supplied in the United States comes from Ukraine, and 35% of palladium comes from Russia. If a war breaks out in Ukraine, the entire global semiconductor industry will face severe raw material shortages.
Semiconductors are essential infrastructure for modern technological development, encompassing products such as satellites, automobiles, airplanes, as well as digital devices like smartphones, computers, and AI. The global semiconductor supply chain is already in a state of high demand and short supply. If regional conflicts disrupt essential raw material supplies, it will undoubtedly affect global economic trade, with related supply chains also being impacted. This is not just an economic trade issue for a particular country but could stagnate global technological development.
References:
Videos: How the Russia-Ukraine conflict could affect the chip industry
Article: Russia-Ukraine war: Impact on the semiconductor industry
The Impact of the Russia-Ukraine Conflict on People’s Lives
(1) Escalating Oil Prices Affecting Living Costs
With the outbreak of war between Russia and Ukraine, oil prices have continued to rise. Currently, the prices of gasoline and diesel have increased by NT$0.3, with the price of 95-octane unleaded gasoline exceeding NT$33, the highest in nearly seven and a half years. Such prices have become unbearable for many car-owning commuters and workers.
Russia is a significant exporter of oil and natural gas globally. Blocking Russia’s oil and gas exports will further drive up global energy prices. The sharp rise in global energy prices will inevitably lead to greater inflationary pressures.
Although OPEC member countries like Saudi Arabia may increase oil production, the increased production from these countries cannot fill the supply gap caused by blocking Russian exports. Therefore, even though Russia’s oil exports account for only 10% of the world’s oil exports, it is enough to cause a recent shortage in oil supply, thereby prompting oil price increases.
References:
Videos: Russia-Ukraine conflict | Sharp rise in oil and gas
Article: The impact of Russia–Ukraine war on crude oil prices
(2) Impact of Russia-Ukraine Conflict on Global Food Supply
Regarding food, Russia exports approximately 40 million metric tons of wheat, accounting for 20% of the global export market, while Ukraine exports around 18 million metric tons, accounting for 10% of the global export market. If both countries enter into conflict, 30% of the global wheat supply will be affected, potentially triggering food crises in some countries.
Food crises can lead to strikes, causing prices of some agricultural products to rise, resulting in inflation. Consequently, even central banks tightening monetary policies in some countries may find it challenging to curb inflation. Inflation is now a crucial indicator directly affecting a country’s social stability and economic development.
For example, due to high inflation, Los Angeles in the United States has become known as the “city of crime.” This year, there have been multiple cases of civilians looting cargo trucks in Los Angeles. According to foreign media statistics, an average of about 90 containers are robbed each day in Los Angeles. Civilians are risking their safety for essential goods. This kind of scenario, typically associated with third-world countries, is increasingly occurring in some cities in the United States.
It’s not just the United States; the British Food Foundation recently released a report stating that around 4.7 million adults in the UK experienced a “food crisis” in January, accounting for about 8.8% of the total population. Among them, one million adults (equivalent to 3.6% of the population) reported being unable to afford food, forcing them to go without a meal for a day in the previous month. In July, this proportion was 2.6%.
References:
Videos: Russia’s war in Ukraine could lead to a global food crisis
Article: The impact of Russia-Ukraine conflict on global food security
(3) Gold Hits 17-Month Highs
With the official outbreak of war between Ukraine and Russia, the price of gold has soared, reaching a 17-month high. Russia is one of the world’s largest gold-producing countries, and the current market uncertainty continues to stimulate demand for precious metals. Juan Carlos Artigas, Director of Global Research at the World Gold Council, pointed out that gold is an excellent tool for hedging systemic risks and unexpected market events, and this time is no exception.
In other precious metals, silver futures for March delivery rose by nearly 0.6% to $24.687 per ounce; April platinum futures fell by 2.7% to $1062.10 per ounce; March palladium futures rose by 2.5% to $2501.10 per ounce.
References:
Videos: Russia-Ukraine Crisis’ Impact On Oil
Article: Gold Watch – Impact of the Ukraine war on gold prices
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