Commodity Markets Roiled by Russian Invasion of Ukraine
(21 March 2022 – Europe) Russia’s invasion of Ukraine is choking critical raw materials trade as the country is punished with economic sanctions, ratcheting up commodity prices as a result.
As a major exporter of commodities, Russia produces significant volumes of primary resources nations utilise to manufacture vehicles, transport goods, power energy grids and grow food. Russia previously earned over US$1 billion a day exporting oil and gas, principally to Europe. New Zealand’s Fonterra, the world’s biggest dairy exporter, has permanently discontinued Russian operations due to Moscow’s invasion of Ukraine.
Russian aluminium and nickel are used for creating cans, cars and electric batteries while Russian palladium is used in catalytic converters to reduce carbon emissions. Russia was a leading wheat exporter and low-cost trading partner for almost every type of crop fertilizer such as potash. Rising energy prices have already been increasing fertilizer prices and the European Union’s shift to curtail Belarusian potash exports will undoubtedly exacerbate that trend. The consequences will be far reaching as harvests beyond Europe could suffer in more than their European counterparts.
Major financial institutions are also increasingly concerned over the potential for Russian-backed cyberattacks on SWIFT, the international payments system banks use to execute cross border payments. Western sanctions have cut off several Russian banks from SWIFT, including Promsvyazbank and VTB.
“Europe is fully dependent on external supply of potash. There are limited countries that can provide and replace deliveries from Belarus, so there will be an impact for sure” stated Fertilizers Europe Head of Communications, Lukasz Pasterski.
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