How The Russia-Ukraine War Affects Us

Just as we thought the world’s economy could recover in the COVID-19 endemic stage, the Russia-Ukraine war worsened it.

After months of scaling tensions between Russia and Ukraine over two contested areas, Donetsk and Luhansk, Russia announced a full launch of military invasion into Ukraine. Recording over hundreds of civilian deaths and injuries, worry has filled the globe forcing countries and the North Atlantic Treaty Organisation (NATO) to take a stance on the particular matter. 

The US, UK, and the European Union have announced their sanctions against Russia, but many countries including Malaysia have yet to announce their stands. Some may even wonder, why should we? We’re not directly affected by it, right?

While the war situated in Europe may seem distant to many Malaysians, it’s without doubt that the country would feel its negative effects or consequences sooner or later. So let’s take a look at why Russia wanted to invade Ukraine, resulting in a war that could potentially affect the whole world.

The Russia-Ukraine Conflict Behind the War

The invasion that took place on 24th February 2022 came as a shock to the majority of the world’s population. Although this was the case, tensions between the two countries had been rising for centuries. After a revolution in February 1917, a new empire was created called the Soviet Union amongst which held Russia and Ukraine. 

When the Soviet Union collapsed in 1991, Russia and Ukraine had both gotten their independence. Fast forward to 2013, Ukraine’s president, Viktor Yanukovych had refused to sign a NATO agreement with Europe to bring the country closer to them, with the intention of staying loyal to Russia, despite protests from its citizens. As a result, Yanukovych was kicked out of the office, forced to flee the country, and a new interim government took office.

With the new interim government in office, not only did they announce that they’ll sign the EU agreement, they also issued an arrest for Yanukovych over the mass murder of the protestors. This resulted with Russian president, Vladimir Putin, declaring this as an illegal coup and located Russian troops over an area in southern Ukraine called Crimea, which then was taken by Russia.

In 2019, Volodymyr Zelenskiy was voted in as Ukraine’s president and in 2021, he requested NATO to consider their membership resulting with Russia deploying big numbers of troops close to Ukraine's border despite Putin denying any plans of invasion. And the rest is as you know it…

A protest held against the russia-ukraine war and rising tension.

We’ve seen the destruction of Ukraine plastered all over the news. Meanwhile, a bigger and devastating impact is also brewing as the war ensues.

3 Ways the Russia-Ukraine War Affects Malaysia

1. Increase in Oil and Gas Prices

If you’ve a car, you’d probably have noticed the biggest increase in price for RON97 petrol recently.

With the start of the military invasion, oil prices have been recorded to soar, costing over $100 per barrel for the first time since 2014. As Russia holds the number one position for the world’s largest oil and energy exporter, countries that rely on Russia for oil would struggle trying to meet the soaring demand for non-Russian energy supplies. 

Although the initial rise in cost would benefit petrol companies all over Malaysia with the increased profit, the government would have to carry the burden of providing more subsidies towards these companies in the short term.

However, as uncertainty of war rises and inflation occurs continuously, the heavy costs may transfer to Malaysian residents to bear, at which reducing their purchasing power. As a result, transportation costs would be heavier for citizens and students who regularly commute by personal vehicles. In addition to that, countries would feel the pressure in meeting the demand for electricity all over the world. 

A guy's hand pumping petrol into a car.

With Malaysia already suffering from the impacts of the COVID-19 pandemic and a slowed economy, costs of operating power plants had increased, causing a rise in electricity tariffs back in January 2022. Following the global disruptions, there’d be continuous pressure for electricity tariffs to be heightened.

2. Increase in Price of Normal Goods and Other Necessities 

Not only would the country be facing consequences in the rise in prices of oil, everyday goods and other necessities may face the same struggle as well. With both Russia and Ukraine being the main exporters of wheat, the conflict would have major setbacks to the rest of the world.

Following the invasion of Ukraine, the west’s response and its primary weapon is to cut Russia off from global financial markets to damage its economy and their stock market to crash. 

This results in many countries that had relied on Russia for their exports to venture into different markets for goods causing an increase in demand and, subsequently, commodity prices these past few weeks. The cut off doesn’t stop there as many Western companies are also pulling out from the country including popular brands like McDonald’s, Starbucks, Netflix, and Spotify.  

While this may benefit palm oil producers and hundreds of other businesses in Malaysia, the impact on Malaysians is much more severe as food prices increase. Although the extent of food inflation still highly depends on the scale and duration of the war, the flipside may still occur where countries in Asia, including Malaysia, would feel the effects.

Rows of coffee granules in a hypermarket.

As a result, citizens and international students living alone may struggle to match their previous purchases in the grocery store and end up buying less but for the same prices as the months before. With the constant inflation over the years due to the COVID-19 pandemic, the war in Ukraine will put even more pressure on the prices of necessities and foods especially with the already increasing price of red meats, vegetables, and other necessities.

3. Disruptions in International Trade and Distributions

Ever since the start of the pandemic, the world had struggled to adjust to the disruptions of international trade. As an example, the cost of air, sea, and land freight has increased, making it more expensive for countries to import its products.

The pressure was more than heightened when the war started, with many countries deciding to stop trade with Russia. As a result, citizens residing in Russia have struggled to import goods from other countries and are shut off from any technological advancements overseas.

As it stands, the invasion had bore negative consequences to airlines all over the world. In remembrance of MH17, a Malaysian Airlines 777 airplane flying over eastern Ukraine that had been shot down, claiming the lives of 255 people in 2014, countries are forced to take alternative routes to avoid areas affected by war. Due to this, air freight and travel costs will eventually increase as more resources are taken up to determine safe routes in travel. This could also make it more expensive for international students to enter Malaysia.

On the other side of the coin, Malaysian students in Russia are faced with a money crunch following the disruptions in international trade. With their links to the outside world disrupted, banks in Russia are unable to process funds and remittances originating from outside the country.

A cargo ship or freighter loaded with cargo boxes.

As a result, Malaysians are stuck with limited cash to sustain their lifestyles, awaiting evacuation with a bag packed of essentials. In view of the difficulties faced by many Malaysians, the government has reached out to Malaysian embassies in Russia to aid those affected.

What Should We Further Expect?

Despite the fact that the Russia-Ukraine war is currently ongoing in a different continent, the ease of international transactions means that every country on the globe will face the negative consequences indirectly. 

As it stands, its short term effects put a lot of stress on inflation and blockage of international trade between Russia and other countries. However, it’s still uncertain how big its effects would be in the long term for Europeans, especially Ukrainian citizens and the rest of the world whether directly or indirectly. 

Although it’s hard to put a definite expectation at this point of time for Malaysia, the war dampens the opportunity for an economic global recovery and we can only hope it’ll be over as soon as possible.

Afrina Arfa is currently pursuing a Bachelor’s in Business (Hons) Finance and Economics at Taylor's University. She is currently an active member of Taylor’s Orientation Leaders and Taylor’s ETC Magazine Club.