War fall-out could be big blow for Barbados

Article by Colville Mounsey – taken from the Sunday Sun February 27, 2022

The conflict could affect goods getting through the Mediterranean shipping lanes, a recipe for a further increase in the cost of goods.

The world’s attention is currently firmly affixed to the ongoing conflict between Russia and Ukraine, as global leaders ponder the possible geopolitical and economic fallout.

Barbados and the CARICOM region are certainly not insulated from these permutations, as economic and business pundits have already begun to highlight the potential tourism fallout should this develop into a protracted war in Europe. Hikes in the cost of living and rising gas prices have also been areas highlighted as a potential major ripple effect.

Economist Jeremy Stephen cautioned that should the war escalate, it could have serious implications for Barbados’ tourism recovery prospects, energy prices, the cost of living and a shortage of medicines and goods. His views aligned with those of Professor Emeritus at The University of the West Indies, Michael Howard, who said while it was still early days to determine the specific impact on Barbados, there were ensuing negative global realities from which Barbados could not be extricated.

It is important to note that the conflict could affect goods getting through the Mediterranean shipping lanes, a recipe for a further increase in the cost of goods and a scarcity of certain commodities.

Russia is one of the biggest energy suppliers in the world and provides around 30 per cent of the European Union’s natural gas, with its supplies playing a vital role in power generation and home heating across central and Eastern Europe. Last month, Minister of Energy Kerrie Symmonds said Barbadians should brace for more increases in petroleum products as well as natural gas. He also said Government would need to reassess its ability to continue shielding the public from fuel price hikes.

The Ukraine is the second largest country by area in Europe after Russia, with it borders to the east and northeast. It also shares borders with Belarus, Poland, Slovakia, Hungary, Romania and Moldova and has a coastline along the Sea of Azov and the Black Sea. The response from Europe has been swift with Germany halting the certification of the 750-mile Nord Stream 2 gas pipeline while the United States outlined sanctions against Russia, including on two financial institutions, Russian sovereign debt, and on Russian elites and their family members.

The assault, which began on Thursday and has resulted in well over a hundred soldiers and civilians dead and hundreds more wounded, also triggered swift statements from Prime Minister Mia Amor Mottley as well as CARICOM.

Mottley joined world leaders and called on the Russian Federation to cease its hostilities and respect the sovereignty and territorial integrity of Ukraine. She said: “The Government of Barbados firmly believes that a peaceful, negotiated, diplomatic approach which results in the restoration of Ukraine’s sovereignty and territorial integrity is the only approach consistent with the values of the United Nations and with international law”.

Thus far, most pundits concur that it is too early to determine how far reaching the potential ripple effect of the conflict would be and that much would depend on how long the conflict will last, as well as just how much skin the Europe, UK and the US are prepared to put into the game.

However, head of the Sir Arthur Lewis Institute of Social and Economic Studies (SALISES), Professor Don Marshall contends that it is quite unlikely that the current tranche of sanctions will result in any major fallout for Russia, hence unlikely to be effective in getting the Vladimir Putin’s regime to change course.

“China is Russia’s biggest trade partner and so long as China maintains its customary relations there is little economic fallout. Russia remains a part of the SWIFT payments system and so it can continue its trade and business relations as well with Germany – its largest client in the supply of oíl and gas. The US-led sanctions will hurt the working majority in Russia following price hikes but not its elites. So long as the USA does not commit to military interventions on behalf of Ukraine in an effort to halt or reverse Russia’s advance, then energy trades on the stock market will be buoyed,” Marshall said.

Change of posture

He added: “Paradoxically, a change of posture either by China or USA in the direction of neutering Russia’s attempt to colonise Ukraine will upend world political and economic relations as we have known it over the last 40 years.

While this conflict has only captured the attention of some Barbadians in recent months, it has in fact been brewing for years.

Since the ousting of pro-Russian president, Viktor Yanukovych, in 2014 after months of protests against his rule, Putin has frequently accused Ukraine of being taken over by extremists. Russia seized the southern region of Crimea in an apparent retaliation. Putin is credited with triggering a rebellion in the east, backing separatists who have fought Ukrainian forces in a war that has claimed 14 000 lives.

Russia has also long resisted Ukraine’s move towards the European Union and the West’s defensive military alliance, NATO. Late in 2021, Russia began deploying big numbers of troops close to Ukraine’s borders and scrapped a 2015 peace deal for the east and recognised areas under rebel control as independent. Putin also revealed that he supported their claims to far more Ukrainian territory. Significant as it is chilling, is the fact that the development marks the first time since World War II that a superpower has invaded a European neighbour.