Critical thinking

The main consequences of the war in Ukraine to businesses

Ukrainian President Volodymyr Oleksandrovych Zelenskyy
Ukrainian President Volodymyr Oleksandrovych Zelenskyy

Following the pandemic, the war in Ukraine continues to cause huge problems in the global supply chain. Thus, we have increased prices up to difficulties in transporting products and shortages of raw materials and food. Also, the cost of producing cars in the car industry has increased. For Toyota Motor, for example, it has increased by $ 520 per vehicle.

If we estimate that the Japanese car maker plans to manufacture about 10 million cars this year, then we understand that the whole amount is really huge. As for the car parts are no longer ready when the car manufacturers want them. BMW has already announced that it will reduce production at plants in Germany, Austria and Britain, while Volkswagen said that the lack of spare parts will force it to slow down production at its main plant in Wolfsburg and many other German plants. 

Rising prices for energy and other commodities have created many problems, accelerating public and private sector efforts to improve food security.  Rising energy prices are not the only problem. Airlines are forced by the sanctions to completely bypass Russia, which is one of the largest countries in the world. At the same time, shipping companies can not approach Russian ports. Major carriers around the world have already announced the suspension of freight. 

Large companies are forced to reduce their production either because demand for their products has decreased or because product prices are rising. For example, Apple announced that it will make 20% less iPhone SE models next quarter, while also is at the process of reducing production on AirPods. Furthermore, the energy situation is expected to affect the financing of clean energy investments in developing countries. Many countries will have to make significant public and private investments in renewable energy sources to reduce gas imports from Russia. 

The crisis in Ukraine will force Russia and other countries in the long run to look for alternatives to dollar-focused international money transfers and the possible use of digital central bank currencies. Several countries, especially in Asia, are already trying to link their central bank-backed payment platforms. EIU analysts expect more countries to adopt multi-CBDC agreements. The crisis will take this transition to the next stage.

In terms of technology and technology companies, access to technology is considered a competitive advantage for countries, as shown by the US attitude towards semiconductors. Because the chip industry is fragmented and the product is complex, each «player» will need to use US equipment at some point. Therefore, any US technology sanction makes it impossible for a country or company to purchase semiconductors. 

Also, the internet is becoming more national and less global. The EU, through its approach to data privacy values and the regulation of artificial intelligence, has also created regional barriers to the internet. China is using a national firewall to restrict access to content that its government considers dangerous. 

The war in Ukraine will show how the situation in the world economy will develop in the long run. However, the changes are already noticeable.


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Maria Gourtsilidou
Maria Gourtsilidou is Senior Editor of Research and Data Analytics at the CEOWORLD magazine. She is responsible for driving thought leadership, using data analytics to showcase the company’s products and services, and fostering knowledge sharing between CEOWORLD magazine and client organizations. She studied Public Administration (Economics Of The Public Sector) in Greece and holds a Bachelor’s in Public Administration from the Panteion University of Political & Social Studies. Follow Maria Gourtsilidou on Twitter. Write at maria-gourtsilidou@ceoworld.biz.