This blog post calmly examines how the Russia-Ukraine war has impacted our daily lives and economy through energy, grain, and inflation, using concrete examples.
In February 2022, war broke out following Russia’s invasion of Ukraine. For many South Koreans, these two countries—especially Ukraine—are somewhat unfamiliar entities. While the names might be recognized, pinpointing them on a map would likely prove difficult. Consequently, in the early stages of the war, the situation might have felt like a distant story, hard to grasp as real. Yet, though the conflict raged far away, its effects quickly seeped into our daily lives. The flames we thought were merely a ‘fire across the river’ to watch from afar have now spread and consumed our lives.
The first and most profoundly felt impact was none other than ‘rising prices’. Russia is one of the world’s largest natural gas exporters and one of the top three oil-producing nations, holding significant sway in the energy market. Furthermore, Russia is a key supplier of various major mineral resources. Meanwhile, Ukraine is a major grain exporter, accounting for approximately 10% of global wheat exports and about 18% of corn exports. With war breaking out in these two countries, the export routes for key raw materials and agricultural products were blocked, resulting in a global surge in prices.
Europe, in particular, has relied on natural gas supplied through pipelines originating in Russia. However, this supply has become severely disrupted since the war began. While gas supply wasn’t completely halted, deepening supply insecurity inevitably caused gas prices to skyrocket. This wasn’t due to physical destruction of pipelines by shelling, but because Russia responded by turning off the gas valves after the North Atlantic Treaty Organization (NATO), centered on Western Europe, strongly condemned its invasion. While Russia cited other reasons publicly, this was essentially a political and economic pressure tactic. As Russian natural gas supplies contracted, the stance of major European countries, including Germany, began to shift.
Crude oil faced a similar situation. Although the pipelines themselves weren’t damaged, international oil prices surged as Western nations, led by the United States, restricted Russian crude exports as part of economic sanctions against Russia. Simultaneously, Ukraine’s grain exports were effectively blocked as Russia sealed off key ports. Furthermore, the global semiconductor industry relied on Russia and Ukraine for over 50% of its supply of specialty gases essential for production. Consequently, the war triggered a worldwide semiconductor shortage. Thus, the war’s damage extended far beyond direct combat on the battlefield, spreading in various forms across diverse sectors including energy, food, and high-tech industries.
So, does South Korea import large quantities of crude oil, natural gas, or grain directly from Russia or Ukraine? In reality, it does not. Then why did South Korea’s prices surge sharply? This is because the global economy is tightly interconnected. While the direct impact of the war was felt primarily in Europe, the scramble by nations to secure scarce supplies led to a contraction in global raw material markets overall. The ripple effects ultimately reached South Korea.
As oil prices surged, U.S. President Biden visited Saudi Arabia to request increased production, but his request was not accepted. Countries worldwide anticipated Russia’s economy would collapse quickly due to intense economic sanctions led by the U.S. However, Russia’s economy proved more resilient than expected as China and India imported large volumes of Russian crude oil at relatively low prices. Indeed, the Russian ruble, which had plummeted immediately after the U.S. sanctions announcement, rapidly recovered. By the second half of 2022, it even strengthened beyond its pre-war levels.
While international energy markets and exchange rates continued to fluctuate afterward, this case clearly demonstrates that the effects of sanctions are not always linear.
The war between Russia and Ukraine starkly revealed how tightly interconnected the world is through trade today, and how deeply nations depend on each other. Simultaneously, it reveals the intricate strategies and calculations unfolding behind the scenes to protect national interests. Maintaining South Korea’s current economic level without trade is virtually impossible. This is precisely why we must maintain a constant interest in other nations and global affairs—both to properly understand our own economy and to accurately interpret the changes impacting our lives.
