Russia invades Ukraine and Vladimir Putin news

The coronavirus pandemic has driven global supply chains to breaking point, causing shortages and skyrocketing prices. As the pandemic has subsided, Russia’s invasion of Ukraine threatens to further disrupt fragile supply chains.

Russia is a major producer of raw materials, ranging from oil and natural gas to palladium and wheat. Ukraine is also a major exporter of wheat as well as neon. The crisis casts doubt on at least some of these vital supplies.

“The greatest risk facing global supply chains has shifted from the pandemic to the Russian-Ukrainian military conflict and the geopolitical and economic uncertainties it has created,” wrote Tim Uy, economist at Moody’s Analytics. report Thursday.

Moody’s warned that the Russian-Ukrainian crisis “will only exacerbate the situation for companies in many sectors”, especially those dependent on energy resources.

Europe, in particular, will suffer the most from soaring energy prices because it depends on Russia for natural gas. Oil prices have surged around the world, pushing up gasoline prices and increasing the cost outlook for airlines and industries like plastics that use petroleum.

The Russian-Ukrainian crisis could increase pressure on the global computer chip shortage, which began during Covid and has been at the heart of soaring new and used car prices.

Moody’s pointed out that Russia provides 40% of the world’s supply of palladium, a key resource used in the production of semiconductors. Additionally, Moody’s said Ukraine produces 70% of the world’s supply of neon, a gas used in making computer chips.

“We can expect the global chip shortage to worsen if the military conflict persists,” Uy wrote.

Neon prices skyrocketed during the 2014-2015 conflict in Ukraine. Even though chipmakers have stockpiled resources, Uy said the stocks can only last for so long.

“If a deal is not negotiated in the coming months, expect the chip shortage to worsen,” Uy said, adding that it will pose significant risks to automakers, electronics companies , phone manufacturers and other companies.

The combination of high energy prices and increased pressure on the supply of computer chips will complicate the inflation picture. Consumer prices rose in January at the fastest rate in nearly 40 years. Although many economists predicted that inflation would cool considerably later this year, this is now in doubt.

“The near-term effects on the U.S. economy of the invasion of Ukraine, the ongoing war, sanctions, and future events remain highly uncertain,” the Federal Reserve Chairman said. Jerome Powell told Congress on Wednesday.

Beyond computer chips, Moody’s pointed out that the Russia-Ukraine crisis has the potential to drive up costs in the transportation industry, the most energy-intensive of all industries.

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