Opinion – Vinicius Torres Freire: What the war in Ukraine has to do with the price of bread and gasoline

Ukraine sells 17% of the maize on the world market. It has relevant weight, although it lags behind the USA, Brazil and Argentina. Ukraine and Russia export 30% of the wheat purchased by the rest of the planet — that’s a lot.

Almost 47% of the gas and 25% of the oil that the European Union imports comes from Russia. Russians have roughly 11% of the world’s oil exports, just behind Saudi Arabia (17%). Nearly half of Russian exports are energy, which supports the economy and government bills.

What impact can a war have on the prices of little life? It also depends on the size of the sanctions against Russia, of course, which seems to depend on the size of the war, but not only.

If Russia were to block Ukraine’s sea departure, the price of grain could rise as well. But China, more or less an ally of Vladimir Putin, buys a lot of its corn in Ukraine.

If Russia’s energy exports to the European Union were stopped, Russians and Europeans would go down the drain, further kicking up the price of oil.

In the Friday of war frenzy in the American media, the media specializing in grains was more concerned about the soybean and corn crop in Brazil and Argentina, damaged by bad weather. They were talking about a slight rise in the price of wheat, in passing.

Oil is expensive, rising from US$ 77 per barrel (Brent) at the end of last year to US$ 93.5 at the end of last week. However, it is the price around which it has fluctuated since early February, when the crisis in Ukraine worsened, but not necessarily because of geopolitical turmoil.

The money dealers, the financial markets, are indeed more nervous, particularly in the United States, where the Joe Biden government and the political, media and finance elite seem to think or propagandize that the “imminent war” is now inevitable.

Of course, a massive invasion of Ukraine could have consequences that go beyond these elementary remarks and restraints. It ranges from the panic effect on finance to the imponderable: from the risk of uncontrolled conflict to a Russian fiasco, although the International Institute of Strategic Studies (IISS) says that Russian troop equipment, composition and training have improved after embarrassment in the rapid invasion of Georgia in 2008.

In between, Russia can subject Ukraine to a long state of siege. It can resort to cyber warfare, interventions through eastern Ukrainian separatists, sabotage, threats that create economic distrust and decision-making paralysis in business and politics, while demoralizing the punitive mood and inhibiting the action of the “West”. This must come at a cost, but a marginal one.

The biggest question is whether, after the plague, we will still have a real war. Furthermore, as far as economic speculation is concerned, it is necessary to find out what kind of tough sanctions the US and allies can impose on Russia without suffering a boomerang effect (expensive oil, more inflation, crashes in the financial markets).

As is well known, the Americans threaten to take money from Russian oligarchs, the country’s state-owned companies and hurt the banks. It’s a mess. What if it doesn’t work? The attempt to break Russia’s economic legs would not be free for the world, apart from the risk of even greater armed conflict.

Meanwhile, the dollar falls non-stop in Brazil in 2022. Despite the Ibovespa’s tumbles, money from non-residents (“foreigners”) continued to enter the stock exchange (until February 16, R$52 billion, more than half of what entered in full 2021). The inflow of dollars into the country this year exceeds the total for 2021. It’s a surprising lull.