M.Altin Kopf needs natural gas to run his family-owned Zinkpower GmbH, which rust-proofs steel components in western Germany.
Zinkpower’s facility on the outskirts of Bonn uses gas to keep 600 tons of zinc in the molten state each day, worth €2.5 million ($2.5 million). Otherwise, the metal hardens and destroys the tanks in which steel parts are immersed before becoming automobile suspensions, buildings, solar panels and wind turbines.
Six months after Russia invaded Ukraine, the consequences pose a devastating threat to the global economy, including companies like Zinkpower, which employs 2,800 people. Not only is gas much more costly, but if Russia completely cuts off supplies to Europe to retaliate against Western sanctions, or if utilities can’t stockpile enough for the winter, gas won’t be available at all. It may disappear.
Germany may have to impose gas rationing, which could paralyze industries ranging from steelmaking to pharmaceuticals to commercial laundry. “If they say cut you off, all my equipment will be destroyed,” said Kopf, who is also chairman of the association of German galvanizing companies.
Governments, businesses and families around the world are feeling the economic fallout of war just two years after the coronavirus pandemic ravaged global trade. It is becoming more likely that we will have a darker winter. Europe is on the brink of recession.
High food prices and food shortages are exacerbated by the gradual resumption of fertilizer and grain shipments from Ukraine and Russia, which could lead to widespread hunger and insecurity in developing countries.
Outside Kampala, Uganda’s capital, Rachel Gamisha said the Russian war in faraway Ukraine had hit her grocery business. It sells for $6.90 a gallon and you can feel it. This week she’s 2,000 shillings (about $16.70), but next week she could be 3,000 shillings ($25).
“You have to limit yourself,” she said. “I need to buy some fast-moving ones.”
Gamisha also noticed a phenomenon called “shrinkflation”. The price may not change, but a donut that previously weighed him 45 grams may now only weigh 35 grams. Bread that was 1kg is now 850g.
Russia’s war prompted the International Monetary Fund last month to cut its global economic outlook for the fourth time in less than a year. Lenders expect growth of 3.2% this year, up from 4.9% projected in July 2021, well below last year’s strong 6.1%.
“The world may soon be teetering on the brink of a global recession, just two years after the last global recession,” said IMF chief economist Pierre-Olivier Grinchat.
Rising food and energy prices pushed 71 million people into poverty worldwide in the first three months of the war, according to the United Nations Development Programme. The Balkans and sub-Saharan African countries were hit hardest. The United Nations Food and Agriculture Organization predicts that up to 181 million people in 41 countries could go hungry this year.
In Bangkok, rising prices for pork, vegetables and oil are forcing street food vendor Warunee Deejai to raise prices, cut staff and work longer hours.
“I don’t know if we can keep the price of lunch affordable,” she said. Unfortunately, there is no end in sight.”
Even before Russian President Vladimir Putin ordered an invasion of Ukraine, the global economy was under pressure. Inflation soared as the better-than-expected recovery from the pandemic-induced recession overwhelmed factories, ports and freight yards, causing delays, shortages and higher prices. In response, central banks began raising interest rates in an attempt to slow economic growth and curb price spikes.
“We all have different things going on,” said Robin Brooks, chief economist at the Institute of International Finance. It’s getting infinitely harder to do.”
China, pursuing a zero-COVID policy, imposed a lockdown that severely weakened the world’s second-largest economy. was working on its debts.
All these challenges could have been manageable. But when Russia invaded Ukraine on February 24th, the West responded with harsh sanctions. Both actions disrupted food and energy trade. Russia is the world’s third largest oil producer and a major exporter of natural gas, fertilizers and wheat. Ukrainian farms feed millions of people around the world.
The resulting inflation ripples through the world.
Near Johannesburg, South Africa, Stephanie Muller compares prices online and searches various grocery stores to find the lowest prices.
“I have three children and they all go to school, so I feel the difference,” she said.
Bui Thu Huong, who is shopping at a market in Vietnam’s capital Hanoi, said he is limiting his spending and eating out less on weekends. Cooking at home with her kids has at least one advantage she has.
Indonesia’s agriculture minister, Syahrul Yasin Limpo, warned earlier this month that soaring wheat prices could triple the price of instant noodles, a national staple in Southeast Asia. In neighboring Malaysia, vegetable farmer Jimmy Tan laments that fertilizer prices have risen by 50% for him. He also pays more for consumables such as plastic sheets, bags, and hoses.
In Karachi, Pakistan, far from the Ukrainian battlefield, Kamran Arif takes another part-time job to supplement his wages.
“We can’t control prices, so we can only increase our income,” he said. Paul Weisman, Meckenheim, MDT/AP