Russia attacks Ukraine: Start of World War 3? How the conflict will affect world adversely

Russia's declaration of war on Ukraine has sparked worldwide indignation, with nations and individuals alike censuring Russian President Putin's action. While the Russian President reiterates it is a military action in Ukraine, explosions were reported in the capital Kyiv and other parts of the country shortly after. Putin also urged Ukrainian forces to lay down their arms and return home, stating that a special military operation was being carried out to demilitarise and denazify Ukraine.

Meanwhile, Ukrainian President Volodymyr Zelenksy stated that he was unable to reach out to his Russian counterpart Putin for negotiations. According to Zelensky, Russia could unleash a big conflict in Europe soon. Experts believe that the Russia-Ukraine conflict could spark a third World War, as his declaration comes as Ukraine faces Russian invasion threats. However, even though the situation on the Russia-Ukraine border is terrible, it does not yet include a direct military conflict between NATO and Russia.

Chances of Russia-Ukraine crisis escalating into World War 3

Indeed, while the United States and the United Kingdom watched in horror as Russia assembled a force capable of invading Ukraine, they quickly withdrew their small contingent of military trainers and advisers. Even the bustling Ukrainian capital Kyiv, as well as other cities, will be vulnerable to attack as long as Russia's prospective invading army is massed on the borders. However, if Russia threatens a NATO member state, it would mark an absolute red line for NATO and the West. Article 5 of the NATO Treaty obligates the whole western military alliance to defend any member state that is under attack.

Ukraine is not a member of NATO, despite its stated desire to do so; something which President Putin is determined to prevent. Meanwhile, Eastern European countries such as Estonia, Latvia, Lithuania, and Poland, who were previously part of Moscow's orbit during the Soviet era, are all current members of NATO. They are concerned that Russian soldiers would not stop in Ukraine and will instead attack the Baltics on the guise of "coming to the rescue" guise of ethnic Russian minorities. Hence, as a deterrence, NATO has deployed reinforcements to its Eastern European members.

Moreover, the United States, the United Kingdom and several European nations have imposed sanctions on Russia in the wake of the invasion. Russia will undoubtedly respond in some way. whereas Western corporations in Moscow are almost certainly likely to suffer, but if Putin so chooses, it might escalate. Cyber attacks, which the experts and Australian PM Scott Morrison has already warned against, could be used as "revenge." These could target banks, corporations, individuals, and even essential national infrastructure, and are notoriously difficult to trace.

The hardship now is that, after years of deteriorating relations with Moscow, Russia and the West have almost no mutual confidence left. And it's a risky setting against which to have a public spat about who's to blame for Ukraine's current turmoil. Time will tell if the current turmoil escalates to World War III, but it is clearly having a negative impact on the world right now. Here's a rundown:

Oil

The geopolitical scenario between Ukraine and Russia has put global commodity markets on edge. The price of a barrel of crude oil is reaching $100. As if this wasn't terrible enough, the war may also put a halt to the production and export of a variety of other items. All of this is expected to have a substantial influence on global economies and fuel inflation, which is already on the cliff in several countries, including the US and the UK.

As if proof to the aforementioned statement, on Tuesday, Brent crude oil prices briefly touched $99.50 per barrel. Notably, ever since September 2014, the price of oil has been at its highest level. Russia is the world's second-largest producer and exporter of crude oil. The country exports 5 million barrels of crude oil per day, with more than half of that going to Europe and 42% to Asia. Supply interruptions in the world's second-largest crude exporter, on the other hand, will have a big impact on the global oil market.

Russian crude oil exports make up 11% of global crude oil exports. If sanctions remove about 60% of this from global markets (with China, Belarus, and possibly a few other consumers defying the sanctions), the world crude oil supply would fall by 3 million barrels per day, sending Brent crude prices beyond $110 per barrel. While a potential revival of the Iran nuclear deal might restore and cover half of the supply shortfall, Brent crude is likely to remain above $100 per barrel for most of 2022.

Natural Gas

The crude oil market will not be the only one affected. Russia also has the largest natural gas reserves in the world. Russia is expected to produce roughly 26.92 trillion cubic feet (Tcf) of natural gas in 2021, second only to the United States, which is expected to produce around 34 Tcf. Russia provides approximately 35% of Europe's natural gas. A major amount of this shipment crosses through Ukraine, where transit costs are collected.

This is projected to drop as a result of the Nord Stream pipelines that run beneath the Baltic Sea. While Nord Stream 1 is now operational, the second is still in the planning stages. Any interruptions in these oil and natural gas shipments will result in severe scarcity in Europe, as well as a significant increase in prices.

Nuclear Warfare

Ukraine's Ambassador Vadym Prystaiko appeared to issue a warning to the world on Tuesday, stating that Russian President Vladimir Putin has inked an agreement allowing him to deploy arms in Ukraine's rebel territories of Donetsk and Luhansk. Prystaiko stated in a broadcast interview with BBC Newsnight that Moscow's whole arsenal includes nuclear weapons and that Putin will threaten nuclear assault in order to establish dominance over a larger portion of his country.

Ukraine's Ambassador was referring to Russian President Vladimir Putin's prior warnings that the world is on the verge of a nuclear war, which can be attributed to the US' withdrawal from arms control treaties and destabilising military plans in eastern Europe ostensibly in the name of NATO solidarity. It could lead to the collapse of civilisation as a whole and maybe even our planet, Russian President Vladimir Putin warned during a televised news conference. He even went on to say that the possibility of nuclear war is "near and real" as the world watches the weapons control system disintegrate.

Market Crisis

Following President Vladimir Putin's military intervention in Ukraine, financial analysts across the globe raised concern over rising gold prices and falling oil and gas prices on Thursday. Sanctions against Russia could wreak havoc on the global economy. On Thursday, stocks plummeted and oil prices soared by more than $5 a barrel. The German DAX fell 4% to 14,047 points.

The MDAX, index of mid-cap companies fell 2.53% to 31,079.97 points. Stock exchanges around Europe started the day with huge losses, however, they were able to contain them throughout the day. The EuroStoxx 50, the top index in the Eurozone, fell 3.58% to 3831.15 points. The DAX has already dropped more than 5% in the last six trading days as a result of the situation in Ukraine.

Moreover, it is not limited to oil and gas. Russia is the world's largest wheat producer, and Ukraine ranks fifth. Russia also exports 23% ammonia, 17% potash, 14% urea, and 9% phosphates. At a time when China has already set aside a large portion of its urea and phosphates production for internal use, the loss of Russian products would result in additional shortages and higher prices. Because Russia is a big exporter of nickel, palladium, aluminium, platinum, steel, and copper, a potential confrontation may cripple global manufacturing supply chains. Any disruption will result in a substantial increase in prices.

(With inputs from agencies)

Image: AP