Just before midnight on Monday, Peruvian President Pedro Castillo appeared on television to declare an unprecedented state of emergency for Lima, the capital. All the city’s residents, he said, were to stay indoors for 24 hours, beginning just two hours after his announcement. The controversial decision, which would later be rescinded after protesters ignored it, came in response to widespread demonstrations by truck drivers and transportation syndicates against the spike in fuel prices caused by Russia’s invasion of Ukraine.
Peru’s new crisis came just after Sri Lanka’s president declared a state of emergency in his own country. The Indian Ocean nation has also seen massive protests over a growing economic crisis caused by the government’s mismanagement of the economy and made much worse by a confluence of global events, culminating with the war in Ukraine.
From Peru to Sri Lanka, Russia’s attack on Ukraine is sending out shockwaves of economic disruption that will have major political implications, especially since it comes after two years of an economically damaging global pandemic. Russian President Vladimir Putin may have taken aim at Ukraine, but he is creating instability across the entire planet. The damage is already visible in some cases, but the worst and most lasting impacts of this savage war are still ahead of us.
Each region and each country will encounter the new troubles within its unique context, but the outline of the big-picture problem is already taking shape: The main vector of instability is inflation, which by now has a well-established track record of contributing to social and political upheaval.
It’s well-known that soaring prices for wheat—and therefore bread—helped fuel the Arab Spring uprisings a decade ago, launching multiple wars and revolutions in the Middle East and North Africa. The situation today looks even more ominous.
The timing of Putin’s assault on Ukraine aggravated multiple problems that were already afflicting the global economy. Inflation was already climbing due to pent-up demand from the coronavirus pandemic, which also caused supply-chain bottlenecks, depleted fiscal resources and aggravated poverty and inequality. In some regions, extreme weather events driven by climate change, like hurricanes, droughts and frosts, had already worsened food insecurity.
Then came Putin’s war.
Russia and Ukraine together supply more than one-quarter of the world’s wheat. Rather than producing agricultural supplies, Ukraine’s fields are now battlegrounds. Russia’s exports, meanwhile, are crimped by international sanctions and self-imposed restrictions intended to protect domestic supplies. And wheat is not the only key export from the warring countries. They also sell corn, soybeans and, crucially, livestock feed and fertilizer.
Russian President Vladimir Putin may have taken aim at Ukraine, but he is creating instability across the entire planet.
As I noted last week, when cash-strapped Sri Lanka attempted to save money by banning fertilizer imports in late 2021, it unintentionally triggered a collapse in food production. In a few months, the drop in fertilizer and animal feed imports from Russia and Ukraine could have a similar effect. A recent analysis by the Netherlands’ Rabobank projected that global prices for wheat and barley, which are already inflated, could climb by almost another third. That’s dangerous territory for countries like Egypt, the world’s top wheat importer.
It seems that the worst of the impact on food prices has yet to come.
In the meantime, the war has already jolted fuel prices, threatening the global economy and political stability, as is evident in the violent protests in Peru, which have morphed into demands for an end to Castillo’s embattled presidency. In Sri Lanka, as well, massive street protests are defying emergency rules and demanding the resignation of President Gotabaya Rajapaksa with the chant “Go Gota Go.”
Obviously, Peru’s and Sri Lanka’s examples will not be replicated in exactly the same way everywhere, but the crisis is sure to touch all countries. Wealthy nations such as the United States and those in Western Europe will not endure the levels of abject poverty and hunger already besetting poorer parts of the globe. However, the war has raised the chance of a recession beginning in the West, as economist Daniel McDowell explained in an in-depth WPR article two weeks ago.
Even with strong popular support for their economic sanctions against Russia, political leaders in wealthy countries will suffer the consequences of higher inflation, potentially lowered living standards and slower growth if a recession occurs. Already in the U.S., voters rank inflation as a top concern, and it is unlikely that President Joe Biden will be able to escape the political blowback simply by pointing to Putin.
In Europe, where heating gas prices are skyrocketing, a similar phenomenon is likely to materialize, fueling the fortunes of opposition parties and leaders from the far left and far right, even if the population supports the sanctions on Russia.
For poor- and medium-income countries, the sharp rise in costs will be difficult to allay, and will worsen poverty, hunger and inequality at a time when government finances have already been battered by the coronavirus pandemic.
In Latin America, the climbing price of oil will bring additional revenues to exporters and higher costs to net importers. But even big oil producers—Venezuela, Mexico, Colombia and Guyana—will have to contend with rising inflation and squeezed family budgets. In theory, the additional revenues from oil could help lessen the blow, but corruption and inefficiency will make it all but impossible to fully neutralize inflation’s impact.
One of the worst affected regions is sure to be East Africa, where populations are already reeling from the worst drought in four decades, which had left 13 million at risk of severe hunger even before Russian forces crossed into Ukraine, according to the United Nations. One-third of Somalia’s population is already enduring severe hunger, and more than 3 million in neighboring Kenya are grappling with food shortages.
A third wave of consequences from the war will likely strike after the economic, social and political disruptions caused by growing hunger, poverty and instability have taken their toll: large-scale migration. Depending on how severe the impact of higher food prices is, a new wave of refugees and economic migrants could start drifting across the globe, creating another set of political consequences.
And yet, all of these ominous scenarios are not unavoidable. The international community still has an opportunity to step up food support and economic relief for the poorest countries, and oil producers can still boost production to ease global oil prices. For some countries, especially those already beset by mismanagement and corruption, like Peru and Sri Lanka, instability and uncertainty are inevitable. But for the rest of the world, the only certainty is that Putin’s war on Ukraine will touch everyone’s life. But the ultimate effect remains to be seen.
Frida Ghitis is a world affairs columnist and a regular contributor to CNN and The Washington Post. Her WPR column appears every Thursday. You can follow her on Twitter at @fridaghitis.