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Russia’s war on Ukraine triggers global market disruptions as uncertainty around Kremlin’s nuclear threats increases


Russia’s unprovoked war on Ukraine has spurred additional disruptions to a worldwide supply chain still hampered by a global pandemic. And the Kremlin’s threat of using nuclear weapons could exacerbate the situation.

“Disruptions caused by [Russia’s] invasion of Ukraine, the ensuing economic sanctions on Russia and its potential retaliation have severely affected global markets,” according to an August 2022 report by the Organisation for Economic Co-operation and Development (OECD) titled, “The Supply of Critical Raw Materials Endangered by Russia’s War on Ukraine.”

“Prices of oil, gas and certain agriculture products have risen, intensifying inflation pressures and threatening food security in some developing countries. Uncertainty also struck markets in relation to metals that are produced in Russia and are indispensable to supply chains of modern manufacturing production.”

Likewise, uncertainty surrounding Russia’s possible use of weapons of mass destruction is mounting, particularly as President Vladimir Putin shifts strategies with Russian troops losing ground to Ukrainian fighters successfully defending their homeland.

“Most nuclear experts say the likelihood of Russia actually using a nuclear weapon is relatively low, but given Putin’s current predicament, and his public statements, the threat is seen as increasing,” National Public Radio reported in the United States October 2022.

The answer lies with Putin and depends on how he perceives the threat to Russia and to his rule, experts say. Putin warned that he was not bluffing when he said Russia would be ready to use nuclear weapons to defend itself, while casting the war as an existential battle with the West, “which he says wants to destroy Russia and grab control of its vast resources,” Reuters reported in October 2022.

Although some analysts do not buy into the perception of an immediate threat, they say that could change quickly if his back is against the wall. “He is bluffing right now,” Yuri Fyodorov, a military analyst based in Prague, Czech Republic, told Reuters. “But what will happen in a week or a month from now is difficult to say — when he understands the war is lost.”

The Largest Stockpile of Warheads

Russia, with roughly 5,977 nuclear warheads, is estimated to have more nuclear weapons than any other country, according to the Federation of American Scientists (FAS). About 1,500 are retired and scheduled to be dismantled, while the remainder are larger strategic weapons with long-distance capabilities and smaller tactical weapons, Forbes reported in September 2022. By comparison to Russia’s stockpile, the United States has 5,428 warheads, followed by the People’s Republic of China (PRC) with 350, France with 290, the United Kingdom with 225, Pakistan with 165, India with 160, Israel with 90 and North Korea with 20, according to FAS data.

“Although Russia’s number of nuclear weapons has declined sharply since the end of the Cold War, it retains a stockpile with thousands of warheads, with more than 1,500 warheads deployed on missiles and bombers capable of reaching U.S. territory,” according to an April 2022 U.S. Congressional Research Service report.

Any Russian use of nuclear weapons in Ukraine could embolden the PRC to use its arsenal if Beijing views the Kremlin’s tactics as successful, according to a September 2022 report by The Heritage Foundation, a U.S.-based think tank.

“China may become more tempted to actually use nuclear weapons in a conflict should it perceive a favorable nuclear balance of power over the United States” in a war involving Taiwan, the report found. “For example, China could see utility in the limited employment of nuclear weapons if it perceives itself to be losing a conventional war. China may even deliberately pursue such a strategy, which would align with proposals by some [People’s Liberation Army] leaders to abandon its alleged policy of ‘No First Use.’”

Whether the PRC adopts a nuclear first use strategy, Russian deployment of the capability could increase such contemplation by Beijing, inserting additional risks into a potential Chinese invasion of Taiwan, The Heritage Foundation reported.

“The use of nuclear weapons may appear less likely compared to China’s other tools, like conventional forces or economic statecraft, but its nuclear weapons will significantly impact crisis escalation, insert risk into U.S. action and compose China’s only existential threat to the United States,” according to the report.

Supply Chain Stress

Economists say Russia’s war on Ukraine will profoundly modify the exchange of energy, raw materials, industrial parts and goods among the PRC, Russia and the West, especially if Beijing continues backing Putin.

“With oil and gas prices soaring due to the war, transportation costs will follow suit. What is less obvious but equally important is that the war imposed constraints on the ability to use Russian transportation infrastructure to support manufacturing in Asia,” according to a March 2022 article in the Harvard Business Review titled, “How the War in Ukraine is Further Disrupting Global Supply Chains.” “Indeed, many companies have been building components and finished goods in China and using the Russian railway to move these items to Eastern and Western Europe. Of course, it is possible to ship some of these items by air, but that is significantly more expensive, especially now that airlines need to bypass Russia.”

  • According to OECD, Russia produces raw materials including:
  • Aluminum — Used in vehicles, airplanes, construction, power sector, food and beverage packaging.
  • Nickel — Used in stainless steel, magnets and alloy for construction, transport, medical equipment, electronic devices and power generation.
  • Potash — Used in nutrients for fruits and vegetables, rice, wheat and other grains, sugar, corn, soybean, palm oil and cotton.
  • Vanadium — Used to improve the stability and corrosion resistance of steel alloys for applications in space vehicles, nuclear reactors and airplanes.

“Prices of aluminum and nickel reached their 10-year high in February 2022. The price of potash saw an especially pronounced peak, when in February 2022, it jumped almost 80% compared to the previous months,” according to OECD. “Prices of palladium and vanadium have seen rapid spikes since January 2022. The market volatility caused by Russia’s invasion of Ukraine is clearly visible on daily statistics.”
Industry alone can’t address the supply chain issues, and it’s unlikely to be a quick fix, experts say. Governments must work with businesses for marketplace solutions. Reducing dependency on the PRC and Russia, the Harvard Business Review said, will take considerable investment and time.

“Until infrastructure investments in local regions happen, companies should stress test their supply chains and pursue strategies to make them more resilient to risks,” according to the Harvard Business Review report. “About the only thing certain right now is the challenges to global supply chains are going to increase for the foreseeable future.”


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