What if the war does not end soon?
The war is not ending soon. It may drag on for long, possibly for years. This is what global leaders and strategists forecast about the Russia-Ukraine war that began on 24 February.
Russia's war in Ukraine could take years, Nato Secretary General Jens Stoltenberg said on Sunday.
A similar warning was aired by a top US military officer earlier in April, which is now being politically endorsed. After US military aid in millions of dollars were disbursed and several billions more were pledged, European leaders, including the French president and the German chancellor, visited Kyiv, offering Ukraine more weapons and European Union's candidate status.
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The Russian president, on the other hand, declared "the end of the era of the unipolar world". All these moves point to the prospects of a prolonged war, as the Economist Intelligence Unit had expected a month ago that the war would continue through 2022 and at a greater or lesser tempo for years to come.
Countries are preparing for the worse, depending on their immediate and long-term concerns. For the West, it is preeminently a security concern and they are gearing up accordingly, apart from efforts to find alternatives to energy and food supplies.
But for the rest of the world, the economic concerns come first as the war has disrupted supplies of food, fertiliser, fuel and raw materials, making production, business and life unpredictable. Prices of everything have skyrocketed. Food and energy futures are bleak.
The developed nations are experiencing record inflation in decades and taking tough steps to control spending, which will dampen consumer demand – a concern for Bangladesh that depends on exports to these countries.
The energy supply crunch reminds the world of the 1970's oil crisis that stagnated global growth amid surging inflation – a situation coined as stagflation.
Meanwhile, the subsidy burden is growing huge for Bangladesh.
Bangladesh's allocation for subsidy, mainly for energy and fertiliser, reached a historic high of Tk82,745 crore as Finance Minister AHM Mustafa Kamal on 9 June proposed a 54% rise for the new fiscal year beginning on 1 July. Of the amount, Tk47,300 crore will be spent on power, LNG and agriculture, which is Tk12,000 crore higher than the revised budget for the outgoing fiscal year.
Agriculture Minister Abdur Razzaque on Sunday said Bangladesh is buying fertiliser "worth $300 for $1,200" from Canada as the country is not in a position like India to ignore western sanctions and buy cheaper oil and fertiliser from Russia and Belarus.
"We do not know what will happen during the next Boro season, which requires the biggest supply of fertilisers," the minister told The Business Standard.
Alarm bell all around
The World Food Programme estimates the ripple effects of the war could increase the number of people facing severe food insecurity by 47 million in 2022.
UN Secretary-General António Guterres shared his grave concern about the world's future food and energy supplies as well as the cost-of-living crisis leaving no country or community untouched.
Record high energy prices are also triggering blackouts and fuel shortages in all parts of the world, especially in Africa.
Food prices are at near-record highs. Fertiliser prices have more than doubled, sounding alarms everywhere. Without fertilisers, shortages will spread from corn and wheat to all staple crops, including rice, with a devastating impact on billions of people in Asia and South America, too, the UN chief noted.
"This year's food crisis is about lack of access. Next year could be about lack of food," he warned, stressing that Ukraine's food production, and the food and fertiliser produced by Russia, must be brought back into world markets – despite the war.
Consumer prices across the rich world are rising by more than 9% year on year, the highest rate since the 1980s. Worryingly, there is growing evidence that the public is starting to expect consistently high inflation, says a report in The Economist.
This adds to the worries of Bangladesh's apparel exporters who are talking about the fear of decline in demand from major export markets – Europe and US.
Inflation in the US, which has already soared to a 40-year high of 8.6% in May, may be even worse.
The UK confronts 1970s-style problems with strikes and inflation, with recession risk and a cost-of-living crisis hitting people's confidence. Union leader supports first nationwide strike in the country since 1926, Bloomberg says.
The worst is yet to come for food inflation in Asia, as Nomura Holdings Inc forecast Asia's red-hot food prices may heat up further in coming months, says another Bloomberg report.
Bangladesh's inflation in May soared to 7.42%, an 8-year high with food prices rising at an even higher rate. Economists say the price shocks would be bigger than the official rate as the basket of commodities monitored does not cover all the items and services consumed by most of the people.
All is fair in love and war
The proverbial saying again proves true in this time of war. Russian fertiliser sales are exempt from the sanctions imposed by US and EU, says Bloomberg as it tracks shipments of Russian fertiliser entering US ports. The US government is encouraging companies to buy and carry more Russian fertilisers, it says, reporting a falling trend in fertiliser prices in North America. US eases sanction on Venezuela, enabling the South American country to ship crude oil to Italy while Russia cut 60% flow of Nord Stream pipeline that pumps gas straight to Germany.
For its own benefit, the European Union has left Russia's Gazprombank out of its harsher sanctions to keep gas flowing.
Germany now looks forward to bring back old coal plants as Russia cuts gas supply as a minister says the European nation will rely more on coal-fired power, according to Bloomberg
India is buying Russian oil on discount and its coal import from Russia has also jumped. China is expected to buy coal from Russia. China's crude oil imports from Russia soared 55% from a year earlier to a record level in May, displacing Saudi Arabia as the top supplier.
Options are limited for Bangladesh. It cannot afford to ignore sanctions and buy fuel oil and fertiliser from Russia or Belarus, as stated by agriculture minister Razzaque on Sunday.
Bangladesh needs to ensure economic use of energy resources, reduce waste of fertilisers, diversify crops and explore more domestic gas.
These are among the suggestions that came from the analysts and experts reached by The Business Standard.
