Russia annexation spells fresh outbreak of crisis for Bangladesh

Highlights:

• Russia annexed four Ukrainian oblasts
• These are: Luhansk, Donetsk, Zaporizhzhia and Kherson
• The territory amounts to more than 90,000 km2 (35,000 sq mi), or about 15% of Ukraine's total area 
• It is roughly the size of Hungary or Portugal
• It create a land connection between Russia and disputed Crimea 
• Took place after referendums condemned by the UN

As Russia ramps up its annexation plans, something that even the United Nations has so failed to stop, Bangladesh is stuck staring at another round of economic shocks. 

Bangladesh used to import cotton, wheat, corn, mustard and lentils from Russia and Ukraine. Out of the country's total 7 million tonnes of annual wheat demand, around 3.5 million tonnes used to come from these countries.

These are now set to take another hit after the condemnation resolution against Russia failed to pass at the UN Security Council on Friday. 

India and China, alongside  Brazil and Gabon, abstained on a draft resolution tabled in the UN Security Council which condemned Russia's "illegal referenda" and annexation of four Ukrainian territories. 

It also called for an immediate cessation of violence while underlining the need to find pathways for a return to the negotiating table.

Putin has signed "accession treaties" formalising Russia's illegal annexation of four occupied regions in Ukraine, marking the largest forcible takeover of territory in Europe since the second world war.

The signing ceremony, held in defiance of international law, took place in the Grand Kremlin Palace in the presence of the country's political elites and came on the heels of Kremlin-orchestrated referendums in the regions: Kherson, Zaporizhzhia, Luhansk and Donetsk, The Guardian reported.

Now Bangladesh must prepare for another set of shocks which will ring throughout the globe. 

Any kind of prolongation of war will cause damage to Bangladesh as well as to other countries, especially importers of energy and food, Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue, said. 

The extent of our losses will depend on the impact of war on these two sectors, he added. 

Besides, due to the prolongation of the war, the pressure on export markets, foreign exchange reserves and currency exchange rates will also increase.

"Till now we have to import a part of our food products. Besides, a large part of imported fertilisers comes from war-torn areas. As a result of the war, there will be a pressure on agriculture and food security.

"Owing to the economic condition of our markets due to the war, our exports will not increase as expected in the future. However, some orders may increase due to order shifts to China."

Just as it is not possible to say how long the war will last, it is also not possible to say how much pressure will increase in the overall economy due to the pressure in these sectors, he said, adding the government has to prepare its action plan assuming that there is no immediate solution to this war.

The possible effects of the war and the remedial measures should be determined with the help of various government ministries as well as private sector specialised research institutes.

The government's austerity measures should be taken forward in the future, he also said, suggesting a search for alternatives.

 At the same time, instead of going towards high growth in the future, efforts should be made to achieve moderate sustainable growth in the next financial year. 

Social security strategies can also be rolled out as well.

At this moment, the government should advance the discussion on foreign aid, especially the budget aid of multinational development organisations, and monetary aid of the IMF, IDB loan aid for the purchase of fuel.

With even Europe already reeling from the aftermath of the conflict, demonstrated by record inflation levels and an energy crisis, the repercussions of Russia's actions are guaranteed to have a global impact. 

Even at the very onset of the war, the Organisation for Economic Co-operation and Development (OECD) said the world economy will pay a "hefty price" for the war in Ukraine encompassing weaker growth, stronger inflation and potentially long-lasting damage to supply chains.

The organisation also slashed its outlook for global growth this year to 3% from the 4.5% it predicted in December and doubled its inflation projection to nearly 9% for its 38 member countries. In 2023, it expects growth to slow to 2.8%.

Six months into the Russian invasion of Ukraine, fears grew about the gas supply amid skyrocketing fuel prices.

Germany was said to have to impose gas rationing that could cripple industries from steelmaking to pharmaceuticals to commercial laundries. "If they say, we're cutting you off, all my equipment will be destroyed," Kopf, who chairs Germany's association of zinc galvanising firms, told the AFP.

All this stoked fears of a recession amid a cold, bleak winter, which has already proven to be true.

Economists around the world have sounded the alarm on a probable global recession set to eat through the growth of countries around the world. 

A director of a leading consumer goods importer in Bangladesh, who did not want to be named, told The Business Standard, "We are already going through a crisis because of the war. Prolonging the war, for whatever reason, means continuing the crisis. Naturally, the effect will be on us."