Russia’s war in Ukraine

Russia’s invasion of Ukraine has caused both catastrophic local harm and unpredictable shocks to regional and international systems. Price inflation and shortages for food and energy are two examples of exponential risks arising from the conflict.

Food security

Prior to the war in Ukraine, Covid-19 and low probability weather events had already caused food price inflation. The conflict has only pushed food prices up further, since Russia and Ukraine are among the largest producers of grains globally, which has added to global inflationary pressures in 2022. Previous increases in the FAO World Food Price Index have correlated with profound social unrest and political instability. ¹ Prolonged high inflation would hurt debt affordability, raise social risk – MIS, April 25, 2022 , ² MIS Global Trade Monitor – September 2022

Energy security

Russia has drastically reduced gas flows into Europe, with some pipelines operating at 20% capacity. ³ MIS - Looming gas crisis intensifies credit pressures for Europe’s most exposed sovereigns – August 2022 Although most countries are well placed to avoid significant energy rationing, individuals and companies alike would feel the inflationary and negative growth effects of a European gas supply shock. While there are limits, companies that are more diversified geographically or by product, or better able to quickly pass costs through to customers, are better able to preserve their credit quality.