Russia’s Invasion of Ukraine: An Initial Assessment of Export Volumes, Prices, and Policy Actions
Abstract
On February 24, 2022, Russian forces invaded Ukraine, sending shockwaves through food, agricultural,fertilizer, and energy markets. Beyond the more serious humanitarian impacts, Russia’s invasion has farreaching economic implications for global agriculture and resource markets. Russia and Ukraine are significant exporters of key staple grains, oilseeds, vegetable oil and meal, fertilizer, and energy products, and a significant share of these exports are sent to vulnerable net food-importing countries. On the other hand, commodity trade flows are often characterized as highly “fungible,” meaning that disruptions to exports in one region of the world can be “easily” replaced by exports of similar varieties from other regions not impacted by the disruption. Contemporaneously, an emerging question of interest has been the role of agricultural policy actions considering Russia’s aggression. The global economy was already teetering on edge with high commodity prices at the start of the year and inflation rates not seen since the early 1980s, and these trends were only amplified by the Russia-Ukraine conflict. Like previous food crises, there has been a concerning flurry of export restrictions since Russia’s military invasion further exacerbated price increases. Although food and fertilizer products have been exempted from most western nation sanctions, these staple products face indirect effects through financing and distribution. Thus, a key question in our setup is how these trade restrictions magnified some of the direct and indirect trade responses to the Russia-Ukraine conflict. This article develops a flexible, theoretically consistent, monthly product line econometric model of bilateral trade volumes to provide a within-year, ex-post evaluation of the impacts of Russia’s invasion of Ukraine on key cereal grains, oilseeds, and fertilizer export volumes, prices, and region-specific global reallocation responses.