If Russia does invade Ukraine, what are the consequences for the world economy?

Russia is disproportionately important as the world’s largest exporter of gas and the third largest producer of oil and oil products, writes Hamish McRae

It would be naïve to suppose that the conflict, if it were to happen, would not damage the exports of both countries (Copyright 2022 The Associated Press. All rights reserved.)

We should hope against hope that Russia will not invade Ukraine, but we must be realistic that it may do so. If it does, there will be great human costs and massive political consequences. Others can comment better about these. Here, what can we sensibly say about what this might mean for the world economy?

Russia and Ukraine are quite small economies, despite the fact that Russia controls the largest landmass in the world and Ukraine the largest landmass (aside from Russia) in Europe. According to the World Bank, in 2020, Russia’s GDP was roughly $1,500bn. Ukraine’s GDP was one-tenth of that, at $150bn. Global GDP was $85,000bn, so together they generate about 2 per cent of the world’s output. Seen through that lens, the direct impact of whatever happens should barely register on the rest of the world.

But there are such complex links in the world economy that this simple, and apparently comforting, calculation does not hold. Russia is disproportionately important as the world’s largest exporter of gas and the third-largest producer of oil and oil products. Ukraine matters as a food producer, particularly of grains. It is the world’s fifth-largest exporter of wheat and of corn, and the sixth largest of barley.