World Bank on Food and Energy Shortage due to Conflict
As the world is still experiencing a pandemic-induced recession, the emergence of the conflict in Ukraine comes at a difficult time for everyone; the turmoil it adds to the already depressed world market is tremendous. As a result, several key issues were identified—including but not limited to commodity markets, logistics networks, supply chains, and foreign investments. However, one key area stands out due to its potential to affect humanity’s livelihood—food and energy security.
In 2019, Russia and Ukraine contributed 25% and 14% to the global wheat and corn exports, respectively. Due to the ongoing conflict, that figure comes close to zero. As wheat and corn are the world’s major sustenance grains, many countries are experiencing a food crisis. Among these nations is Congo, which imported 67% of its grains from Ukraine and Russia. In terms of energy, before the conflict, Russia was one of the largest energy exporters, providing 14% of its crude oil and 9% of its natural gas to the world. With the current situation, the price of crude oil increased by 7%, raising the costs of transportation and production. This has produced a chain reaction that led to a decline in exports and even lower crop yield. The latter occurs because natural gas is the critical ingredient for ammonia fertilizer, which farmers use to enlarge their crop output.
In order to mitigate the effects of the crisis, countries and international organizations worldwide have mobilized support to aid all those affected. Recently, the UN led a trilateral meeting between Ukraine, Russia, and Turkey to allow the export of grains via the latter waterways. Apart from that, the World Bank has pledged more than $13 billion in loans to restore basic necessities for those affected by the situation. These are all large-scale, macroeconomics-oriented actions that can mostly be done by large governmental players. Therefore, the World Bank also developed a set of recommendations detailing what smaller players, such as NGOs and private companies, can do to help out.
WHAT DOES IT MEAN FOR BUSINESSES?
In terms of high oil prices, the World Bank notes that it is highly uncontrollable—a few oligopolies produce oil, so they control its price. However, the bank argues this could be the prime time to change. Businesses should seriously revisit the fuel they rely on and try switching their energy to renewables, whose price does not depend on regulating bodies and often can be produced in-house. Regarding food insecurity, the World Bank experts recommend building food supply resilience through R&D. The bank has recently ramped up research funding in harvesting technology, plantation methods, and smart agriculture by working with regional policymakers to provide grants to technology providers. Companies interested in this can enter into a Public-Private Partnership (PPP) with local governments—capitalizing on more funding and creating innovation that fosters food production resilience. When the next crisis comes, we will be more prepared.
In times of conflict, hardship affects everyone. When it comes, every sector must know its roles and work with each other to alleviate the impacts on all parties. Then, after the pressing issue dissipates, it is vital to create and foster resilience in all shapes and forms—readying humanity for any potential impacts that could arise again.
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