1.1 Global Shares of the Russian Federation and Ukraine in Food Staples, 2020/21

For Ukraine, its global export share of maize amounts to 13.1 percent while its shares of barley and wheat are 11.8 and 8.3 percent, respectively. Taken together, the world export shares of Russia and Ukraine account for almost 30 percent of barley, 27.6 percent of wheat, 23.3 percent of rye, and 15.3 percent of maize. A prolonged conflict between Russia and Ukraine will curb the production and export of cereal products from these countries and, thus, elevate their international prices. Disruptions in the supply of cereals—and, more broadly, food—also have the potential of causing domestic unrest in several countries that are already experiencing food shortages because of climatic shocks and supply chain problems.

TABLE 1.1: Global Shares of the Russian Federation and Ukraine in Food Staples, 2020/21 (%)

Staple Russia Ukraine Total

Share of world production

Wheat Barley Rye Maize Cereals

Sunflower seeds

Sunflower seed oil 11

12.89

16.62

1.23

5.89 3.28 14.28 4.97 17.86 3.21 19.83 2.7

3.93

8.99 14.88

Sources: U.S. Department of Agriculture; Food and Agriculture Organization.

Russia Ukraine Total

Share of world exports

19.3 8.32 27.62 17.6 11.77 29.37 19.35 3.96 23.31 2.19 13.13 15.32 11.76 10.68 22.44

19.04 6.56

25.6

28.88 46.91 75.79

Russia is also a top producer of NPK fertilizer and urea fertilizer.26 Russia is the fourth largest producer of both nitrogen fertilizer and phosphate fertilizer in the world. As an important input in the manufacturing of fertilizers, soaring natural gas prices are feeding into higher fertilizer prices—along with disruptions in their production. Yara International, the world’s second largest fertilizer company based in Norway, recently announced that it will cut in half its production of ammonia and urea fertilizers in Europe due to the lack of availability of raw materials and, hence, high prices. World fertilizer exports are sharply compressing at a time when major crops are undergoing their planting seasons across the globe. A protracted disruption to the global supply of fertilizers could reduce crop production across several countries in the world if farmers curtail their use of fertilizer because of the high prices. These impacts on the supply and use of fertilizers could have adverse consequences on the 2021/22 and 2022/23 production years.27

Russia and Ukraine are important producers and exporters of metals and mineral ores— including basic metals, semiprecious and precious metals, noble gases, and rare earth metals. Transition metals and rare earth metals are critical inputs for manufacturing high-tech products such as semiconductors and lithium-ion batteries. In turn, these products are key parts of automobiles, electronic vehicles, airplanes, computers, household electronics, and defense products, among others. For instance, Russia accounted for significant global shares of exports of palladium (20.7 percent), platinum (12.3 percent), aluminum (8.9 percent), gold (4.4 percent), and to a lesser extent, iron ore (1.4 percent) and nickel (0.4 percent) in 2020.28 Palladium is a key input for semiconductors while nickel is used in manufacturing electronic batteries. Russia also

26 NPK stands for the macro-nutrients used by plants, which are nitrogen, phosphorus, and potassium. 27 Oxford Economics (2022). 28 Russia accounted for 42.9 percent of the worldwide production of nickel in 2020.

produces tungsten (an input for the production of missiles and electrodes for small satellites). Meanwhile, Ukraine’s exports of iron ore accounted for three percent of the global exports of the commodity in 2020. Ukraine also has reserves of manganese and zirconium although their production has not fully materialized. Ukraine largely dominates the world market for neon gas:29 it accounts for roughly 70 percent of world exports of this rare gas—essential in the manufacturing of semiconductors.30 Consequently, the Russia-Ukraine conflict is exacerbating the existing supply chain disruptions in the market of semiconductors, as well as the activity in high-tech and green industries (including manufacturing electric car batteries, electronic devices, integrated circuits, catalytic engines, and solar panels, among other products).

The Impact of Russia and Ukraine on Sub-Saharan Africa: Channels of Transmission

The conflict in Ukraine is likely to impact Sub-Saharan African economies through a series of direct and indirect channels associated with foreign trade and commodity prices (i.e. global prices of energy commodities, metals and mineral ores, and food staples); the pass-through of persistently high commodity prices to food, fuel, and headline inflation; tightening global financial conditions; and smaller flows of foreign financing into the region. These channels of transmission have been further activated at the onset of the Russia-Ukraine conflict.

Trade and Commodity Prices

The Russia-Ukraine conflict has affected Sub-Saharan African economies through higher commodity prices and disruptions in international trade—thus, aggravating existing supply chain problems. A sharp compression of imports from Russia and Ukraine, along with global trade deceleration and rising commodity prices, have affected countries in the region that are net commodity importers—either through direct linkages with the countries in conflict or through soaring global commodity prices. Supply chain disruptions can also affect semiconductor and high-tech industries due to sharp increases in the prices of metals and minerals that constitute inputs in their production processes.

Sub-Saharan Africa’s trade linkages with Russia and Ukraine are not as tight as those with countries in other regions of the world. For instance, Russia and Ukraine account for 1.3 percent of total imports in Sub-Saharan Africa (of which, 1.0 percent comes from Russia and 0.3 percent from Ukraine). However, there is some heterogeneity across countries in the region in terms of trade linkages (figure 1.11). Dependence on imports from Russia and Ukraine is higher than the regional average in some West African countries (the Republic of Congo, The Gambia, Senegal, and Togo) and some East African countries (Sudan and Uganda). Given the lower levels of trade between Russia and Ukraine and most countries in the region, the impact of the conflict on trade in Sub-Saharan Africa is mainly through the channel of higher global commodity prices.

29 Cryoin and Ingas are the major neon gas companies in Ukraine, with production accounting for 45 to 54 percent of the world production. The headquarters of Ingas and Cryoin are located in Mariupol and Odesa, respectively. Ninety percent of neon gas imports to the United States come from Ukraine. The Renesas Electronic Corporation, which is a Japanese semiconductor company, has a research and development base in Lviv (Ukraine) close to the border with Poland. Production of semiconductors is concentrated in the Asia region. 30 CNBC, March 11, 2022 (https://www.cnbc.com/2022/03/12/russias-attack-on-ukraine-halts-half-of-worlds-neon-output-for-chips.html); Bloomberg, March 6, 2022 (https:// www.bloomberg.com/news/articles/2022-03-07/toshiba-concerned-chip-crisis-may-deepen-after-ukraine-invasion).