Barbados is likely to be economically impacted by the Russian invasion of Ukraine which was ordered by Russian president, Vladimir Putin. According to some, the war of invasion which began on Thursday 24 February could easily lead to World War 3 if left unchecked. Others are more optimistic.
To us in the Caribbean, Russia and Ukraine may appear to be very remote and removed from our sphere of living. However, a large part of the landmass of Russia is in eastern Europe. So also is that of the Ukraine which has an estimated population of 42 million.
But as the map shows, Ukraine borders on countries a little more familiar to us such as Poland, Belarus, Hungary and Romania. These countries are themselves bordering on even more familiar western European countries such as Denmark, Switzerland, Austria and Germany the last being a major source of tourists for this country and the home of many Barbadians.
There can be no doubt that this conflict will affect Barbados. The two main effects will be in energy prices and the flow of tourists. Worldwide, oil prices have now gone over the $100 per barrel mark. That price will increase because of the new sanctions that Europe and the USA have and will attempt to put on Russia.
Most of the economic impacts will be indirect through what is called knock on effects; in other words, the prices of intermediate and final products and services that depend on oil and its by-products are also likely to increase, for example, airline tickets.
Europe, particularly Germany, has unwisely made itself heavily dependent on energy from Russia to the tune of 40%. The natural gas pipeline from Russia to Germany has been suspended by the Germans because of their need to show solidarity with NATO countries objecting to the invasion.
Wheat Flour Prices
The Ukraine has also been regarded a “breadbasket of the world”. That is because together with Russia it produces nearly one-quarter of the world’s wheat which is processed into wheat flour. The price of bread and wheat derived products have already increased in Europe.
Barbados is a net importer of wheat flour. In 2020 Barbados exported approximately 1.5 Million USD in flour and imported 4.4 million USD (trendeconomy.com). ADM Mills located at the Bridgetown Harbour, processes flour from imported wheat which is exported to several Caribbean countries.
Even if the price of flour imported into Barbados does not go up, bakeries may still be pressured to ask more for their products if energy prices continue to increase.
More than ever, Barbados needs to accelerate its investment in renewable energy and energy sufficiency strategies. The time may also be ripe to consider replacing at least some of the local uses of wheat flour with alternatives such as breadfruit flour.
Other Natural Resources
Ukraine is also home to several key industrial minerals. These include recoverable uranium, titanium and manganese. It is perhaps not without reason that Russian troops have seized the old Chernobyl Nuclear Power Plant in the north of Ukraine. This plant had a meltdown on 26 April 1986.
Since it is strong and lightweight, titanium is used primarily for aircraft manufacture. Titanium oxide is one of several compounds used in many types of paints. Titanium is also used in several niche industrial applications where corrosion resistance to chlorine and nitric acid is required. Both manganese and titanium are use in purifying steel and making steel alloys.
Assuming that Russia takes control of the Ukraine as a result of the invasion, there is the potential for increases in prices of intermediate and final products made from these minerals, especially if production is coordinated with that of China to which Russia has been “warming” in recent months.
Click to see our dedicated Ukraine Video Update Page here
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Dr. Aldon Tull, the author, is a retired educator who holds a Master of Science in International Marketing and the Doctor of Education.
He can be reached at firstname.lastname@example.org at 246-228-3720 or on Whatsapp at 246-846-3191
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