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On 16 March, the UN Conference on Trade and Development (UNCTAD) published an assessment of the impact of war in Ukraine on trade and development, confirming a rapidly worsening outlook for the world economy, underpinned by rising food, fuel and fertilizer prices, heightened financial volatility, sustainable development divestment, complex global supply chain reconfigurations and mounting trade costs.

The report indicates that restrictive measures on airspace, contractor uncertainty and security concerns are complicating all trade routes going through Russia and Ukraine that are key geographical component of the Eurasian Land Bridge. In 2021, 1.5 million containers of cargo were shipped by rail west from China to Europe. If the volumes currently going by container rail were added to the Asia-Europe ocean freight demand, this would mean a 5% to 8% increase in an already congested trade route. "On top of this, already expensive and overstretched maritime trade will find it difficult to replace these suddenly unviable land and air routes," the report says. "The impact of the war in Ukraine can be expected to lead to even higher freight rates.”

This rapidly evolving situation is especially alarming for developing nations, where serious concern abound over the two fundamental “Fs” of commodity markets – food and fuels. According to UNCTAD calculations, on average, more than 5% of the poorest countries’ import basket is composed of the products that are likely to face a price hike due to the war. The share is below 1% for richer countries.

Source: UNCTAD