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The Russia Ukraine crisis: How will it affect the global economy and businesses?

Reading time 8 minutes | Written by Henrica Westhoeve | 3 March, 2022

Rotterdam, 3 March 2022 Since Russia invaded Ukraine, it has become clear how sensitive supply chains are, but also how quickly access to key raw materials can be blocked. Russia and Ukraine are among the largest export countries when it comes to gas, oil, metals and agriculture. Both countries and their exports are crucial to Europe. The longer this crisis lasts, the more significant the implications for Europe's energy transportation will become, but it will also put pressure on other sectors. In this blog, we will briefly explain the biggest challenges that are currently occurring and the impact of sanctions from the EU and counter sanctions from Russia on business. For a detailed version of this information, we would like to refer you to the white paper on the Russia-Ukraine crisis. 

Download the white paper: Russia-Ukraine Crisis, implications for the global economy and businesses

Disrupted Supply Chain

Russia and Ukraine are both major exporters of agriculture, gas, oil and metals. The moment these raw materials become less available due to a conflict, consequences at further points in the supply chain and bottlenecks arise. Transport costs will also rise because less is available, or an alternative has to be found. Figure 1 shows how many countries depend on Russian and Ukrainian exports of certain goods. For example, 41% of Europe's gas supplies come from Russia and 90% of neon (used to make chips) is sourced from Russia. There are few alternatives available for this. 

Figure 1: Number of countries highly dependent on Russian and Ukrainian exports of certain commodities

Sanctions

Globally, several countries are imposing sanctions on large Russian banks and companies. New sanctions are in sight and are expected to once again target large Russian banks and companies. However, those Russian companies are not the only ones who will feel these sanctions. The entire family structure of these companies consists of more than 16,748 entities spread across 21 countries according to Dun & Bradstreet data. This shows that sanctions have more impact than visible at first glance. Data such as ultimate stakeholders and full family structure of a company are now more important than ever to have insight. By doing so, you reduce the risk of hidden compliance risks. There is a good chance that Russia will soon also come up with sanctions for the EU, the US and the UK. Russia has a dominant position when it comes to gas supply and metals. Sanctions on gas supply in particular will be a problem for Europe because of its dependence. For a more detailed list of sanctions and implications, download the white paper. 

The above also shows how many companies are connected to each other thanks to globalization and the dependencies created in the supply chain. This goes even further: there are nearly 15,000 Tier 1 and 7.6 million Tier 2 supplier relationships with Russian entities globally. As a result, sanctions are creating a ripple effect that we are seeing in the United States, The United Kingdom and the European Union. This further challenges an already fragile global supply chain.

Escalation and recovery

The conflict between Russia and Ukraine could potentially affect Europe's economic recovery. If the situation escalates, there is a chance that NATO could end up in a war situation with Russia. The economic impact of a war situation such as this has disastrous consequences for a global economy that is still recovering from the pandemic.

Conclusion

As a result of this crisis, trade routes are disrupted, freight costs rise, raw materials become partially inaccessible, and major disruptions occur for businesses. Sanctions against Russia also affect other countries and businesses, and counter-sanctions by Russia directly affect gas supplies and commodity prices. All of this could potentially derail the global economy as inflation continues to rise. Much of the rising costs will be passed on to the user, putting a more expensive price tag on products and services. 

Download the white paper: Russia-Ukraine Crisis, implications for the global economy and businesses

Key takeaways

  • Map out the current supply chain and investigate whether potential bottlenecks could arise. 
  • Review any credit risk reports of companies if they are located in Ukraine and/or Russia.
  • Make sure you know about companies who the UBOs are and that you have the full business family of customers mapped out to reduce the risk of hidden compliance risks.

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Henrica Westhoeve

Marketing Content Officer

White paper

Credit Monitoring

Opportunities for your organization in focus

A credit check at customer acceptance is valuable, but also immediately outdated. The real credit risk actually begins after you have accepted a customer. accepted. The solution: monitor the financial health of your customers in real time.

Pdf of 16 pages, 0.4 MB
Credit Monitoring

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