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4 July, 2025
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  • OP/ED

    Azerbaijan dismisses claims of involvement in Israel-Iran conflict

    Elite Purges: Internal Conflict or External Design?

    Trump’s Threat of U.S. Intervention in Iran Exposes Roots of Critics’ Fears

    Crisis-Born, Purpose-Seeking: Can the EPC Define Europe’s Strategic Future?

    Serbia’s Request to the ICJ Turned Resolution 1244 into a Closed Chapter and Kosovo’s Independence into an Internationally Recognized Reality

    Unpredictable world

    Promoting Arab Culture and Language in the Framework of Cultural Diversity and Dialogue.

    ‘A Tragic Circus’: Albanian PD Figures Lash Out After LaCivita-Backed Campaign Collapses

    Erosion of Liberal Democracy in Europe Complicates Canada’s Search for Like-Minded Allies

  • Interview

    Exclusive: “Even After Tito – Tito”/ Ambassador Zlatko Kramarić on Authoritarian Legacies and Democracy’s Future in the Balkans

    The Conclusion of the Diplomatic Mission / Ambassador Dancho Markovski: Strengthening Albania-North Macedonia Relations for a Shared European Future

    A Century of Diplomatic Relations Between Albania and Russia: Exclusive Interview with the Russian Ambassador to Albania, H.E. Alexey Zaytsev

    Exclusive/ The chairman of the Freedom Party, Ilir Meta: “The will of the citizens will triumph in Albania, as it did in North Macedonia”

    Exclusive/ The Russian Ambassador to Albania Mr. Mikhail Afanasiev: Russia only aims to end that war started by the West in Ukraine

    Exclusive/ Skopje’s top diplomat to Tirana, Dancho Markovski: OSCE Chairmanship a Project of National Importance for North Macedonia

    Exclusive interview of Croatian Ambassador Zlatko Kramaric: ‘There is progress in Croatian-Albanian relations, but it is still not enough’  

    The first anniversary of the appointment as Archbishop at the head of the Catholic Church/ Mons. Arjan Dodaj: Only God can be the author of our walk!

    Azerbaijan’s Ambassador Anar Huseynov: President Aliyev’s visit to Albania opened a new page in our relations through the specific accords reached

  • Realpolitik

    Summit G 6+1! The historic Summit and Trump show! Zelensky loses 0:2! Winners and losers of the 12 day war!

    Chancellor Merz passed “the exam”! Political stupidity! 5 per cent or study Russian! The Firing East!      

    A top phone call as disappointment! Exit from Brexit! Germany at the helm! End this political shame up!

    That’s it! The quartet of hope! Shame on Kosovo! The Summit of a Community without Identity!

    Only praises and prolises for Meloni! Facts versus untruths! Immediate ceasefire and genuine peace, no deal for new occupation! Back after 60 years !

    US nuclear tariff bomb!! Europa fires back! NATO ok, but with or without Article 5? Kallas urges reforms!

    Europe riarmed! Germany’s epochal shift! Spoiled soup! EU Commissioner Kos demands reforms!

    Europe tightens the ranks! The Euro-Atlantic Alliance in danger! USA-1945!! A true Peace, not new occupation!

    WASHINGTON, DC - JANUARY 20: President Donald Trump signs executive orders in the Oval Office on January 20, 2025 in Washington, DC.  Trump takes office for his second term as the 47th president of the United States. (Photo by Anna Moneymaker/Getty Images)

    The law of force over the force of law! Multilateral diplomacy is the victim! Euro-Atlantism in danger! Munchen split the West!

  • Current Events

    When bridges divide more than rivers…

    Skopje Growth Plan Summit: Western Balkans Six Urged to Accelerate Reforms

    Summit G 6+1! The historic Summit and Trump show! Zelensky loses 0:2! Winners and losers of the 12 day war!

    The NATO Summit in 2027 will be held in Tirana.

    Exclusive: “Even After Tito – Tito”/ Ambassador Zlatko Kramarić on Authoritarian Legacies and Democracy’s Future in the Balkans

    Geneva meeting begins in bid to halt escalating Israel-Iran conflict

    From Donetsk to Northern Kosovo: Geopolitical Games with the Kosovo Precedent

    G7 leaders fail to reach ambitious joint agreements on key issues after Trump’s exit

    Where does Donald Trump stand on the Israel-Iran conflict?

  • Top News

    The NATO Summit in 2027 will be held in Tirana.

    NATO allies agree to allocate 5% of GDP to defense by 2035

    Reza Pahlavi: “This Is Our Berlin Wall Moment” — Exiled Prince Calls for Global Support as Iran Nears Regime Collapse

    Where does Donald Trump stand on the Israel-Iran conflict?

    Russia Proposes Second Round of Ukraine Peace Talks in Istanbul on June 2

    International leaders congratulate Prime Minister Rama after his victory in the parliamentary elections, securing a fourth term.

    Albania’s parliamentary elections competitive and well run but lacked level playing field, international observers say

    Top Ukrainian delegation arrives in Paris for talks with Western officials

    Marta Kos: Albania Making Rapid Progress Toward EU Integration

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  • Home
  • OP/ED

    Azerbaijan dismisses claims of involvement in Israel-Iran conflict

    Elite Purges: Internal Conflict or External Design?

    Trump’s Threat of U.S. Intervention in Iran Exposes Roots of Critics’ Fears

    Crisis-Born, Purpose-Seeking: Can the EPC Define Europe’s Strategic Future?

    Serbia’s Request to the ICJ Turned Resolution 1244 into a Closed Chapter and Kosovo’s Independence into an Internationally Recognized Reality

    Unpredictable world

    Promoting Arab Culture and Language in the Framework of Cultural Diversity and Dialogue.

    ‘A Tragic Circus’: Albanian PD Figures Lash Out After LaCivita-Backed Campaign Collapses

    Erosion of Liberal Democracy in Europe Complicates Canada’s Search for Like-Minded Allies

  • Interview

    Exclusive: “Even After Tito – Tito”/ Ambassador Zlatko Kramarić on Authoritarian Legacies and Democracy’s Future in the Balkans

    The Conclusion of the Diplomatic Mission / Ambassador Dancho Markovski: Strengthening Albania-North Macedonia Relations for a Shared European Future

    A Century of Diplomatic Relations Between Albania and Russia: Exclusive Interview with the Russian Ambassador to Albania, H.E. Alexey Zaytsev

    Exclusive/ The chairman of the Freedom Party, Ilir Meta: “The will of the citizens will triumph in Albania, as it did in North Macedonia”

    Exclusive/ The Russian Ambassador to Albania Mr. Mikhail Afanasiev: Russia only aims to end that war started by the West in Ukraine

    Exclusive/ Skopje’s top diplomat to Tirana, Dancho Markovski: OSCE Chairmanship a Project of National Importance for North Macedonia

    Exclusive interview of Croatian Ambassador Zlatko Kramaric: ‘There is progress in Croatian-Albanian relations, but it is still not enough’  

    The first anniversary of the appointment as Archbishop at the head of the Catholic Church/ Mons. Arjan Dodaj: Only God can be the author of our walk!

    Azerbaijan’s Ambassador Anar Huseynov: President Aliyev’s visit to Albania opened a new page in our relations through the specific accords reached

  • Realpolitik

    Summit G 6+1! The historic Summit and Trump show! Zelensky loses 0:2! Winners and losers of the 12 day war!

    Chancellor Merz passed “the exam”! Political stupidity! 5 per cent or study Russian! The Firing East!      

    A top phone call as disappointment! Exit from Brexit! Germany at the helm! End this political shame up!

    That’s it! The quartet of hope! Shame on Kosovo! The Summit of a Community without Identity!

    Only praises and prolises for Meloni! Facts versus untruths! Immediate ceasefire and genuine peace, no deal for new occupation! Back after 60 years !

    US nuclear tariff bomb!! Europa fires back! NATO ok, but with or without Article 5? Kallas urges reforms!

    Europe riarmed! Germany’s epochal shift! Spoiled soup! EU Commissioner Kos demands reforms!

    Europe tightens the ranks! The Euro-Atlantic Alliance in danger! USA-1945!! A true Peace, not new occupation!

    WASHINGTON, DC - JANUARY 20: President Donald Trump signs executive orders in the Oval Office on January 20, 2025 in Washington, DC.  Trump takes office for his second term as the 47th president of the United States. (Photo by Anna Moneymaker/Getty Images)

    The law of force over the force of law! Multilateral diplomacy is the victim! Euro-Atlantism in danger! Munchen split the West!

  • Current Events

    When bridges divide more than rivers…

    Skopje Growth Plan Summit: Western Balkans Six Urged to Accelerate Reforms

    Summit G 6+1! The historic Summit and Trump show! Zelensky loses 0:2! Winners and losers of the 12 day war!

    The NATO Summit in 2027 will be held in Tirana.

    Exclusive: “Even After Tito – Tito”/ Ambassador Zlatko Kramarić on Authoritarian Legacies and Democracy’s Future in the Balkans

    Geneva meeting begins in bid to halt escalating Israel-Iran conflict

    From Donetsk to Northern Kosovo: Geopolitical Games with the Kosovo Precedent

    G7 leaders fail to reach ambitious joint agreements on key issues after Trump’s exit

    Where does Donald Trump stand on the Israel-Iran conflict?

  • Top News

    The NATO Summit in 2027 will be held in Tirana.

    NATO allies agree to allocate 5% of GDP to defense by 2035

    Reza Pahlavi: “This Is Our Berlin Wall Moment” — Exiled Prince Calls for Global Support as Iran Nears Regime Collapse

    Where does Donald Trump stand on the Israel-Iran conflict?

    Russia Proposes Second Round of Ukraine Peace Talks in Istanbul on June 2

    International leaders congratulate Prime Minister Rama after his victory in the parliamentary elections, securing a fourth term.

    Albania’s parliamentary elections competitive and well run but lacked level playing field, international observers say

    Top Ukrainian delegation arrives in Paris for talks with Western officials

    Marta Kos: Albania Making Rapid Progress Toward EU Integration

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Home ENGLISH

HOW MAY THE WAR IN UKRAINE AFFECT EMERGING MARKETS?

13 May, 2022
in ENGLISH, In Focus
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By Les Nemethy*

We have all heard the adage that a butterfly flapping its wings in the Amazon could affect the weather patterns on the other side of the planet. May the war in Ukraine also have such unintended consequences?

While I despair at the scale of the humanitarian disaster in Ukraine, this article explores the possibility of unexpected and unforeseeable effects beyond the Ukraine’s borders, including the possibility of more people dying of starvation in other parts of the world than as a consequence of military action in Ukraine.

The three main possible transmission mechanisms for this butterfly effect include: (a) disruption of supply chains, particularly in agriculture; (b) energy supply disruptions and (c) monetary effects. These trends often reinforce each other. All were already underway before the war; the war seems to aggravate and catalyze these effects.

a, Disruption of supply chains, particularly in agriculture

Global supply chains were already under strain, independent of the Ukrainian war, partly due to Covid-19. For example, 30% of the world’s containers are now at a standstill, waiting around ports, due to the disruption, with most of them stuck near Shanghai, locked down by Covid.

The Ukrainian war adds a big additional dimension to the supply side challenges, particularly as related to agriculture. As the chart below shows, Russia, Ukraine and Belarus account for a substantial percentage of production of the main agricultural commodities.

To make matters worse, a very large percentage of the above-mentioned exports go to emerging markets. Countries such as Lebanon and Egypt (the world’s largest importer of grain), as well as the entire sub-Saharan region, are highly dependent on Russian and Ukrainian exports. But also in the microchips sphere—did you know that two Ukrainian factories supplying neon for production of lasers that make microchips were closed due to the war?

b, energy supply disruption

The Ukrainian war has further reinforced tightness in oil and gas markets—which has had a considerable effect on hydrocarbon prices globally, particularly in Europe. Given that ammonium fertilizer is made from gas, and almost 40% of global potash exports from Russia and Belorus (as shown in the graph above), the world will see a sharp reduction in use in 2022. Many producers of ammonium, including the largest in Hungary, have stopped production altogether, due to volatility of energy prices.

If farmers don’t use fertilizer, they will see their yields fall; if they do use fertilizer, they will have to pass through input costs. Either way, the pressure on agriculture prices will accelerate. Although the chart below shows massive increases in agricultural prices, in my opinion, this process of increasing agricultural prices still has a long way to go.Energy price increases also have a negative effect on GDP growth and a general inflationary effect. Most post-war recessions coincided with energy price increases.

c, Monetary effects

The aforementioned supply chain issues and commodity price increases have all contributed to accelerating inflation. This, in turn, has mobilized several central banks towards monetary tightening. Much has been written about the difficulty central banks will have in reducing inflation without causing a recession, while they target the fabled “soft landing”. Never have current inflation levels been cured without inducing a recession. The ongoing problems of Covid (and associated lockdowns) and the Ukrainian war (and associated sanctions) further complicate Central banks’ efforts—to use the expression—like taking a camel through the eye of a needle.

Chair Powell of the US Fed, has announced his intention to carry out what would amount to the most severe monetary tightening since the early 1980’s. This would likely take 10-year Treasuries rise from under 3% to well over 5%.

Whenever the US raises interest rates, emerging markets suffer greatly, as they are forced to raise interest rates by at least that much, to avoid capital outflows. Many emerging countries have already been forced to raise interest rates substantially, and once again, in my view, the trend will go further.

Debt service is becoming increasingly difficult. Sri Lanka has already defaulted. Pakistan and Peru, also highly indebted, have experienced outbreaks of violence or mass protests.

Emerging market banks are highly exposed to sovereign debt (usually bonds of their own national Governments):

As bond yields rise, Government bond prices plummet, impairing banks’ Tier 1 capital. A vicious circle may ensue. Weaker banks will lend less, contributing to the contraction of the economy.

Unfortunately, the average person in emerging countries already spends a huge percentage of their income on foodstuffs and owns very few assets that might help withstand inflation. It is the average person who will feel the brunt of the phenomena discussed in this article. Remember that it was food shortages that triggered the Arab Spring roughly a decade ago.

The butterfly effect is hard to prove, but over time, the Ukrainian war may actually cause more deaths from starvation in the world’s poorest countries than war deaths Ukraine.

*CEO Euro-Phoenix Financial Advisors Ltd., former World Banker

Related Posts

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When bridges divide more than rivers…

3 July, 2025
Current Events

Summit G 6+1! The historic Summit and Trump show! Zelensky loses 0:2! Winners and losers of the 12 day war!

30 June, 2025
ENGLISH

Azerbaijan dismisses claims of involvement in Israel-Iran conflict

29 June, 2025

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Skopje Growth Plan Summit: Western Balkans Six Urged to Accelerate Reforms

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30 June, 2025

Azerbaijan dismisses claims of involvement in Israel-Iran conflict

29 June, 2025

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