Global Economic Impacts of Russia-Ukraine War

President Biden in his State of the Union Address seemed to be enjoying temporal victory against Russia, and to be honest, the points that he brought about were impressive to someone who doesn't understand what this war is, it seemed like a sure win over Russia. The entire house was amazed telling from their applause as it reached the crescendo, I was disappointed!! This is not something to celebrate, this is something that needs further reevaluation, any war strategists around the world could ultimately see why it's never optimal for countries to elect politicians in such senior roles as presidential seat. They don't feel what we all feel on the ground, I was never too sure about myself, I had to prove myself beyond a reasonable doubt, I decided to model the possible consequences of this war based on the main points that his excellency presented. To be honest, he was celebrating short outcomes, he failed to highlight the unforeseeable future outcomes to the citizens of the world. This is precisely why he is a politician and not a strategist.

I am sure he has the buy-in of the entire world by now, why not, it's a quick victory, we all love fast food, don't we? ?? In the end, you'll agree with me that this war is more dangerous than what the world is perceiving it to be. If we do not reach dialogue right now, the outcome is a zero-sum game that will end in tears at least for many people. In the following couple of paragraphs, with your permission, I am going to present to you my argument. Anyone is welcome to critic my findings and improve where possible, I might have left some key variables out.

Europe's dependence on Russian gas and oil has been increasing over years, Moscow supplied 123.8 billion cubic meters of gas via pipelines to Europe, excluding Turkey, last year, according to S&P Global Platts, more than Norway's 108.6 billion cubic meters. This gave Russian pipelines a market share of 29%. Russia also exports liquified natural gas to Europe on tankers. Russia is the single biggest gas exporter and a major supplier of crude, refined products, and other resources. Oil prices have since jumped, Futures for Brent crude, the benchmark in international oil markets, went up by 3.1% to $100.99 a barrel. No worries, this is just a small percentage spike, prices can reverse back to the daily average, lol!  Gas prices leaped to 15% before settling 4.8% higher in Europe, thanks to the plans of the US and the major oil-consuming nations to release 70 million barrels of oil from their emergency stockpiles. See what I am saying? These things are never that serious. But think about it, we do not know how long this war is going to last, based on our model if the sanctions continue, the International oil reserves will eventually go down. Assuming that Russia, being a major exporter, is still under sanction, the economic forces dictate the price to go up. This is where this game becomes interesting.

Let me take steps back, short-term Russia's economy is going to suffer, their overseas revenues are slowly being slashed, their financial system is collapsing, inflation has gone up to compensate for the deteriorating value of the as we are talking the value of the ruble. Sanction is a great strategic move but it's short-term. Ask yourself, how many times has the US sanctioned Iran and the country came back bouncing as nothing has happened!!? This shows you that sanctioning is no longer a golden trick. NATO could have coped if sanctions make it hard for Russia to export oil. Russia exports 6.5 million barrels of oil a day, 2 million of which go to China and will keep flowing because of their bilateral relationship. No doubt about that, even my 5-year-old daughter can see that.  What you don't see is the fact that if China buys some more oil at discounted prices, the rest of the world would be seeking to make up for 3 million barrels a day of lost supply (this is a simple concept in finance called hedging, I am sure you get the meaning), which it could meet with spare production capacity in the gulf and strategic-reserve releases but at an extra cost that will be passed on to the customers of course.

Let's get back to our simple model, shall we? The drop in international oil reserves and its consequential fluctuation in energy supplies due to uneven demands and price volatilities will destabilize global supply chain stability. It is at this point that all the cards fall from the tower of cards. Every area of the global supply chain will be affected in one way or another. The cost of products is bound to go up, this will cause the global commodities prices to also go up. The energy demands will always go up, take, for example, heating bills, transportation, farming, and food processing as some of the energy-intensive activities. When these areas are affected, everyone in ???? points of the supply chain will be affected. This is coming to haunt us, you said monsters are not real? Wait for the one we are currently building.

Based on our analysis, the impact of this war is tremendous, currently, it might seem like a small snow stone but the effects will slowly pile up into a snowball. The labor markets and the financial markets will be brought down, but hey, you can buy cryptocurrency or gold if you'd like to protect your assets. ?? The people that I feel for the most are mere mortals like me, innocent children, men, and women whose lives will be affected.

This content is not meant to polarise any individual against the other, I have written it for the purpose of educating each one of us on the impact of our decisions.

Link to the model: https://photos.google.com/photo/AF1QipMPAqpsOhdsP1A8RQPGtGJARjuve9ChqAVXoIQ8