The Banking Executive Magazine - April 2022 Issue

Conflict in Ukraine The Ukrainian conflict has caused increases in oil and food prices, fur- ther harming developing countries striving to recover from the pan- demic. International organizations should provide financing to help these economies cope with multiple shocks, and back regulations to pre- vent speculation in key markets. It is hard to define any winners in the ongoing Russian-Ukrainian conflict. But the losers extend far beyond the two countries and their citizens. The economic impact of the conflict will be felt around the world, in- cluding in many developing coun- tries that are already struggling to recover from the COVID-19 pan- demic. A direct consequence is the effect of rising oil prices. The price of bench- mark Brent crude jumped by approx- imately 20% to more than $139 per barrel, its highest level since 2008 – probably in response to news that the United States and its European allies were discussing a possible ban on imports of Russian oil, which had so far been exempt from Western sanc- tions. (On March 8, the US an- nounced a ban on imports of Russian energy products, while the United Kingdom pledged to phase out im- ports of Russian oil and oil products by the end of 2022.) But global energy prices had already been rising, following a period of dramatic volatility during the pan- demic. The price of Brent crude, which had fallen to as low as $9 per barrel in April 2020 at the height of the pandemic’s first wave, rose above $90 per barrel in January 2022. Since then, the Ukraine con- flict has put further upward pressure on oil and gas prices. Media and especially in western countries has focused on the impact of rising energy prices in Europe, which relies heavily on natural gas imports from Russia. But most of the world’s oil and gas importers are much poorer. Many of these coun- tries were unable to mount fiscal re- sponses to the pandemic on the scale of those in the US and other advanced economies, and have since experienced much weaker recoveries in output and em- ployment. This latest oil- price spike is a blow they can hardly handle, as it is likely to generate balance-of-payments prob- lems and domestic inflationary pres- the BANKING EXECUTIVE 32 ISSUE 160 APRIL 2022 CONFLICT IN UKRAINE’S EFFECT ON DEVELOPING COUNTRIES The price of benchmark Brent crude jumped by approximately 20% to more than $139 per barrel, its highest level since 2008