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    How Sanctions on Russia Are Affecting the Global Economy

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    The price of energy has already shot higher, and the conflict imperils supply chains, factors that could exacerbate inflation and suppress growth.In the span of just a few days, the global economic outlook has darkened while troops battled in Ukraine and unexpectedly potent financial sanctions rocked Russia’s economy and threatened to further fuel worldwide inflation.The price of oil, natural gas and other staples spiked on Monday. At the same time, the groaning weight on supply chains, still laboring from the pandemic, rose as the United States, Europe and their allies tightened the screws on Russia’s financial transactions and froze hundreds of billions of dollars of the central bank’s assets that are held abroad.Russia has long been a relatively minor player in the global economy, accounting for just 1.7 percent of the world’s total output despite its enormous energy exports. President Vladimir V. Putin has moved to further insulate it in recent years, building up a storehouse of foreign exchange reserves, reducing national debt and even banning cheese and other food imports from Europe.But while Mr. Putin has ignored a slate of international norms, he cannot ignore a modern and mammoth financial system that is largely controlled by governments and bankers outside his country. He has mobilized tens of thousands of his troops, and, in response, allied governments have mobilized their vast financial power.Now, “it’s a gamble between a financial clock and a military clock, to vaporize the resources to conduct a war,” said Julia Friedlander, director of the economic statecraft initiative at the Atlantic Council.Together, the invasion and the sanctions inject a huge dose of uncertainty and volatility into economic decision-making, heightening the risk to the global outlook.A corn warehouse near Stavropol, Russia. Russia and Ukraine are large exporters of corn.Eduard Korniyenko/ReutersThe sanctions were designed to avoid disrupting essential energy exports, which Europe, in particular, relies on to heat homes, power factories and fill gas tanks. That helped dampen, but did not erase, a surge in energy prices caused by war and anxieties about disruptions in the flow of oil and gas.Worries about shortages also pushed up the price of some grains and metals, which would inflict higher costs on consumers and businesses. Russia and Ukraine are also large exporters of wheat and corn, as well as essential metals, like palladium, aluminum and nickel, that are used in everything from mobile phones to automobiles.Already eye-popping transport costs are also expected to soar.“We are going to see rates skyrocket for ocean and air,” said Glenn Koepke, general manager of network collaboration at FourKites, a supply chain consultancy in Chicago. He warned that ocean rates could double or triple to $30,000 a container from $10,000 a container, and that airfreight costs were expected to jump even higher.Russia closed its airspace to 36 countries, which means shipping planes will have to divert to roundabout routes, leading them to spend more on fuel and possibly encouraging them to reduce the size of their loads.Loading rolls of steel onto a ship at the port of Mykolaiv in Ukraine. One expert predicted that ocean transport costs could triple.Brendan Hoffman for The New York Times“We’re also going to see more product shortages,” Mr. Koepke said. While it’s a slower season now, he said, “companies are ramping up for summer volume, and that’s going to have a major impact on our supply chain.”In a flurry of updates on Monday, several Wall Street analysts and economists acknowledged that they had underestimated the extent of Russia’s invasion of Ukraine and the international response. With events rapidly piling up, assessments of the potential economic fallout ranged from the mild to the severe.Inflation was already a concern, running in the United States at the highest it has been since the 1980s. Now questions about how much more inflation might rise — and how the Federal Reserve and other central banks respond — hovered over every scenario.“The Fed is in a box, inflation is running at 7.5 percent, but they know if they raise interest rates, that will tank markets,” said Desmond Lachman, a senior fellow at the American Enterprise Institute. “The policy choices aren’t good, so I don’t see how this has a happy outcome.”Others were more cautious about the spillover effects given the isolation of Russia’s economy.Adam Posen, president of the Peterson Institute for International Economics, said there were vexing questions, particularly in Europe, about what the conflict would mean for inflation — and whether it posed the prospect of stagflation, in which economic growth slows and prices rise quickly.But overall, he said, “the damage is likely to be small.”That doesn’t mean there won’t be intense pain in spots. Mr. Posen noted that a handful of banks in Europe could suffer from their exposures to the Russian financial system, and that Eastern European companies might lose access to money in the country.Thousands of people fleeing Ukraine are also streaming into neighboring countries like Poland, Moldova and Romania, which could add to their costs.Thousands of Ukrainian refugees, including this family at the Polish border in Medyka, have fled Ukraine for Poland, Romania and Moldova.Maciek Nabrdalik for The New York TimesTurkey’s economy, which is already struggling, is likely to take a hit. Oxford Economics lowered its forecast for Turkey’s annual growth by 0.4 percentage points to 2.1 percent because of rises in energy prices, disruptions to financial markets and declines in tourism.Russia’s Attack on Ukraine and the Global EconomyCard 1 of 6A rising concern. More

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    Corporations Raise Prices as Consumers Spend ‘With a Vengeance’

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    Corporate America is lifting prices and bragging about bigger profits as consumers open their wallets and spend heartily.Doughnut sellers, milkshake purveyors, tire manufacturers and rental car agencies are all discovering that something is different about America’s pandemic-weathered economy: People are willing to pay more for the goods and services they want to buy.Companies are taking advantage of a moment of hot and seemingly unshakable demand — one in which consumers are spending “with a vengeance,” to borrow the words of one executive — to cover rising costs and to expand their profit margins to prepandemic or even record levels. Corporate executives have spent recent earnings calls bragging about their newfound power to raise prices, often predicting that it will last.If it pans out, that trend that could have big economic implications.Planned corporate price adjustments could continue to boost inflation, which is running at its fastest pace in 40 years. The Federal Reserve is trying to assess whether businesses and households are changing their expectations in a way that might make rapid price gains a more permanent feature of the economic landscape.A selection of comments from recent earnings calls show just how companies are thinking about this moment..Rental Car CostsEverything related to automobiles seems to be increasing in cost, and rental cars are the vanguard of that trend. Company leaders are trying to make the profitable moment last.“The overall rent-a-car industry still has more demand than supply,” Joe Ferraro, the president and chief executive officer at Avis Budget Group, the rental car company, said on a Feb. 15 earnings call. “Given the current trends, we are cautiously optimistic about what a rebound in demand could mean once Covid is behind us,” he added.The year “2021 showed us what’s possible,” he said, noting also that he expects the first quarter of 2022 to be the most profitable in the country’s history.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: We asked readers to send questions about inflation. Top experts and economists weighed in.What’s to Blame: Did the stimulus cause prices to rise? Or did pandemic lockdowns and shortages lead to inflation? A debate is heating up in Washington.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.The company has realized, “especially given what we’ve been through in the last two years,” that targeting the most possible rentals — effectively competing by offering lower prices — is “not how you maximize profit,” Brian Choi, its chief financial officer, said on the call.“We choose instead to compete based on the quality of our product and our service,” he said.Tire DemandDemand for cars has also bolstered the market for tires.“It’s a really very, very good constructive pricing environment that we’ve seen right now, probably the best in recent memory,” Richard J. Kramer, the chief executive at Goodyear, said on a Feb. 11 earnings call.The company does look to its competitors as it makes its price increases — but they, too, are charging more.“There are nine competitors that we tend to track, and seven out of the nine have announced price increases in the first quarter, and one of the ones who hadn’t raised prices right at the end of last year,” Darren Wells, its chief financial officer, said on the call. Goodyear saw profit margins expand last year, driven in part by price increases.Sizing Up Beef CostsThe restaurant family that includes Outback Steakhouse, Bloomin’ Brands, is planning to raise prices about 5 percent across its brands to cover rising labor and food costs — and, by pairing that with efficiency improvements, it is managing to increase its profits.“It became clear that the 3 percent pricing we previously discussed was not be enough to offset the increased inflationary pressures our industry is facing,” said Christopher Meyer, the chief financial officer at Bloomin’ Brands, speaking of the last quarter. “Given that we had not taken a material menu price increase since 2019, we are confident that 5 percent is appropriate.”Mr. Meyer noted that operating inflation was 4.9 percent and labor inflation was 8.9 percent in the final quarter of 2021, but that the company had managed to increase its profits through improving efficiency by simplifying its menu and by cutting food waste.In 2022, he said, the company expects beef inflation “in the mid-to-high teens” and wage inflation “in the high single-digit range.”Recovering Profits in FoodShake Shack is among the companies hoping to benefit as consumers spend.Amy Lombard for The New York TimesAs beef and other food costs have increased, so have Shake Shack’s menu prices. But officials think consumers will be able to spend through the burger and ice cream inflation as virus risks fade and foot traffic picks up in the cities where its stores are located.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Ukraine War Strains North Africa Economies

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    Egypt imports most of its wheat from Russia and Ukraine, and is looking for alternative suppliers. And Tunisia was struggling to pay for grain imports even before the conflict.CAIRO — On the way to the bakery, Mona Mohammed realized Russia’s war on Ukraine might have something to do with her.Ms. Mohammed, 43, said she rarely pays attention to the news, but as she walked through her working-class Cairo neighborhood of Sayyida Zeinab on Friday morning, she overheard a few people fretting about the fact that Egypt imports most of its wheat from Russia and Ukraine.War meant less wheat; war meant more expensive wheat. War meant that Egyptians whose budgets were already crimped from months of rising prices might soon have to pay more for the round loaves of aish baladi, or country bread, that contribute more calories and protein to the Egyptian diet than anything else.“How much more expensive can things get?” Ms. Mohammed said as she waited to collect her government-subsidized loaves from the bakeryRussia’s invasion of Ukraine this week threatens to further strain economies across the Middle East already burdened by the pandemic, drought and conflict. As usual, the poorest have had it the worst, reckoning with inflated food costs and scarcer jobs — a state of affairs that recalled the lead-up to 2011, when soaring bread prices helped propel anti-government protesters into the streets in what came to be known as the Arab Spring.In a region where bread keeps hundreds of millions of people from hunger, anxiety at the bakeries spells trouble.In Egypt, the world’s top importer of wheat, the government was moving in the wake of the Russian invasion to find alternative grain suppliers. In Morocco, where the worst drought in three decades was pushing up food prices, the Ukraine crisis was set to exacerbate the inflation that has caused protests to break out. Tunisia was already struggling to pay for grain shipments before the conflict broke out; the war seemed likely to complicate the cash-strapped government’s efforts to avert a looming economic collapse.Harvesting wheat in Luxor, Egypt.Khaled Elfiqi/EPA, via ShutterstockBetween April 2020 and December 2021, the price of wheat increased 80 percent, according to data from the International Monetary Fund. North Africa and the Middle East, the largest buyers of Russian and Ukrainian wheat, were experiencing their worst droughts in over 20 years, said Sara Menker, the chief executive of Gro Intelligence, an artificial intelligence platform that analyzes global climate and crops.“This has the potential to upend global trade flows, further fuel inflation, and create even more geopolitical tensions around the world,” she said.After years of mismanaging their water supplies and agricultural industries, countries like Egypt, Algeria, Tunisia and Morocco cannot afford to feed their own populations without importing food — and heavily subsidizing it. In recent years, the number of undernourished people in the Arab world has increased because of the overreliance on food imports, as well as a scarcity of arable land and rapid population growth.Beyond its effect on the price of bread, the uncertainty and turmoil brought on by the war will push up interest rates and lower access to credit, which, in turn, would quickly force governments to spend more to service their high debts and squeeze essential spending on health care, education, wages and public investments, said Ishac Diwan, an economist specializing in the Arab world at Paris Sciences et Lettres university.He predicted a rise in economic pressure on Egypt, Tunisia, Jordan and Morocco, warning that Egypt and Tunisia in particular could see peril to their banking sectors, which hold a large share of the public debt.Egypt is also heavily dependent on tourism from Russia, which has helped its tourism industry recover from the Covid-19 pandemic, giving the country extra cause for alarm.Global inflation and supply chain issues stemming from the pandemic have also raised the price of pasta in Egypt by a third over the last month. Cooking oil was up. Meat was up. Nearly everything was up.But most important, bread, the cost of which had already risen by about 50 percent at non-subsidized bakeries over the last four months; a five-pound note (about 30 cents) now buys only about seven loaves of bread, down from 10, bakery employees said.Egyptians, about a third of whom live on less than $1.50 a day, rely on bread for a third of their calories and 45 percent of their protein, according to the Food and Agriculture Organization, a United Nations agency.Mona Fathy, 36, serving food to her children in her home, in the impoverished neighborhood of El-Ayyat in Giza, Egypt.Mohamed Abd El Ghany/ReutersGovernment officials said on Thursday that Egypt had enough grain reserves and domestically produced wheat to last the country until November. But because of rising import prices President Abdel Fatteh el-Sisi last year announced that Egypt would raise subsidized bread prices this year, risking public fury.“Of course I’m worried,” said Karim Khalaf, 23, who was collecting and stacking baladi loaves as they slipped out of the oven, steaming slightly, in a bakery in Sayyida Zeinab on Friday morning. “My salary hasn’t changed, but now I’m spending more than I’m making.”Morocco, where the all-important agriculture sector employs about 45 percent of the work force, is facing an economic crisis precipitated by global inflation, a surge of food and oil prices, and the worst drought in three decades.Anti-government protests that erupted on Sunday suggested that many Moroccans have lost patience with their six-month-old government as they struggle to make ends meet two years into a pandemic that annihilated the once-lucrative tourism industry.Understand Russia’s Attack on UkraineCard 1 of 7What is at the root of this invasion? More

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    Inflation Is a Worry for 9 in 10 Americans Polled

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    The fastest inflation in decades is contributing to Americans’ dour view of the U.S. economy.Nearly nine in 10 adults say they are at least somewhat concerned about inflation, according to a survey conducted this month for The New York Times by the online research firm Momentive. Worry about rising prices cut across generational, racial and partisan lines — 85 percent of Democrats and 96 percent of Republicans said they were concerned.The survey was conducted Feb. 1-7, before the tensions over Ukraine and the Russian invasion there led to a jump in energy prices.Fear of inflation is weighing on people’s view of their own finances and the economy overall. About 75 percent of respondents rated the economy as fair or poor, and only 28 percent said they expected their own finances to be better off a year from now, the lowest share in the five years Momentive has conducted the survey. Asked to identify the most important issue facing the country, dozens of respondents volunteered inflation, which wasn’t offered as an option.The findings are consistent with other surveys that have shown a sharp decline in economic confidence in recent months. The University of Michigan’s long-running index of consumer sentiment fell to its lowest level in more than a decade in early February, with a third of respondents spontaneously citing inflation as a concern. The university will release final data for February on Friday.“People just hate inflation,” said Michael R. Strain, an economist with the American Enterprise Institute. “They hate inflation in a way that I just did not understand until last year.”Consumers’ pessimism is striking because most indicators, other than inflation, show that the economy has made significant strides in recent months. The unemployment rate has fallen to 4 percent, and job growth was strong in January despite a jump in Covid-19 cases. Wages are rising at their fastest pace in years.But only 14 percent of employed respondents in the Times survey said they had received a raise large enough to keep up with inflation, down from 33 percent in December. And people are becoming more skeptical that price increases will fade quickly: 76 percent of respondents said they were worried that inflation would “continue for an extended period,” up from 70 percent in December. More

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    A Key Inflation Gauge Is Still Rising, and War Could Make It Worse

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    A measure of inflation closely watched by the Federal Reserve is expected to show that prices continued to rise in January, accelerating on a monthly basis and increasing from a year earlier at the fastest pace since 1982.Economists expect that the Personal Consumption Expenditures index, which the Fed targets as it aims for 2 percent annual inflation on average over time, rose 6 percent from the previous January. Prices probably climbed 0.6 percent from December, up from 0.4 percent the prior month, based on the central estimate in a Bloomberg survey.The Commerce Department will release the data at 8:30 a.m. on Friday.High inflation remains stubborn at a tense moment. With consumers already struggling with rising costs, Russia’s invasion of Ukraine this week promises to push inflation even higher as prices for oil and other commodities increase.The Fed has been preparing to steadily pull back its pandemic-era economic support in an effort to cool off consumer demand and tame prices. The White House is monitoring inflation closely as rising prices for food, rent and gas shake consumer confidence and dent President Biden’s approval ratings ahead of midterm elections in November.The fresh inflation reading won’t surprise economists or policymakers — the Personal Consumption Expenditures number is fairly predictable because it is based on Consumer Price Index figures that come out more quickly, along with other already available data. But it will reaffirm that price increases, which were expected to prove temporary as the pandemic economy reopened, have instead lasted almost an entire year and seeped into areas not affected by the coronavirus.Price increases have hit a wide array of products and services, including used cars, beef, chicken, restaurant meals and home furnishings, and several trends risk keeping inflation elevated. Notably, wages are rising rapidly, and employers are finding that they can pass their climbing labor costs along to shoppers.Grocery shopping in Queens this month. Price increases are sweeping a growing array of products and services, and several trends could keep them elevated.Amir Hamja for The New York TimesEconomists are also warily eyeing the conflict in Ukraine, which has already caused oil and gas prices to rise and is likely to push commodity costs higher still.Researchers at Goldman Sachs estimate that an increase of $10 per barrel of oil would increase headline inflation in the United States by a fifth of a percentage point while lowering economic output by just under a tenth of a percentage point.Brent crude oil, the global benchmark, rose as much as 6 percent to more than $100 per barrel after Russia invaded Ukraine and could climb further as Russia reacts to sanctions from the United States and Europe. Russia is a major exporter of energy to Europe.“Potentially, Russia could retaliate by limiting oil exports,” Patrick De Haan, head of petroleum analysis at GasBuddy, said on Thursday. Prices at the pump are likely to reflect repercussions from the conflict almost immediately, he said.Russia’s Attack on Ukraine and the Global EconomyCard 1 of 6A rising concern. More

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    Federal Reserve Isn't Likely to Change Course After Ukraine Invasion

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    Federal Reserve officials are turning a wary eye to Russia’s invasion of Ukraine, though several have signaled in recent days that geopolitical tensions are unlikely to keep them from pulling back their support for the U.S. economy when the job market is booming and prices are climbing rapidly.Stock indexes are swooning, and the prices of key commodities — including oil and gas — have risen sharply and could continue to rise as Russia, a major producer, responds to American and European sanctions.That makes the invasion a complicated risk for the Fed: On one hand, its fallout is likely to further push up price inflation, which is already running at its fastest pace in 40 years. On the other, it could weigh on growth if stock prices continue to plummet and nervous consumers in Europe and the United States pull back from spending.The magnitude of the potential economic hit is far from certain, and for now, central bank officials have signaled that they will remain on track to raise interest rates from near zero in a series of increases starting next month, a policy path that will make borrowing money more expensive and cool down the economy.Loretta Mester, president of the Federal Reserve Bank of Cleveland, said during a speech on Thursday that she still expected it “will be appropriate to move the funds rate up in March and follow with further increases in the coming months.”But she noted that the invasion could inform how quickly the Fed moved over a longer time frame.“The implications of the unfolding situation in Ukraine for the medium-run economic outlook in the U.S. will also be a consideration in determining the appropriate pace at which to remove accommodation,” Ms. Mester said.Her comments were in line with those that many of her colleagues have made this week, including on Thursday after the invasion: Central bankers are monitoring the situation, but with inflation rapid and likely to head higher yet, they are not preparing to cancel their plans to pull back economic support.“I see the geopolitical situation, unless it would deteriorate substantially, as part of the larger uncertainty that we face in the United States and our U.S. economy,” Mary C. Daly, president of the Federal Reserve Bank of San Francisco, said Wednesday at an event hosted by the Los Angeles World Affairs Council. “We’ll have to navigate that as we go forward.”But Ms. Daly said she did not “see anything right now” that would disrupt the Fed’s plan to lift interest rates.Thomas Barkin, president of the Federal Reserve Bank of Richmond, said during an appearance Thursday that “time will tell” if the policy path needed to adjust. Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said during a separate speech on Thursday that it was not his baseline expectation that the Ukraine conflict would affect the timing of the central bank’s first rate increase.Even if it is not enough to shake the Fed from its course, some analysts are warning that the fallout of the conflict could be meaningful.“Normally geopolitical crises ultimately turn out to be a fade for financial markets and a buying opportunity for investors willing to look past the headlines,” Krishna Guha at Evercore ISI wrote in a research note Thursday morning. “We are very wary of taking that line today.”Mr. Guha noted that the invasion could disrupt the post-Cold War world order and warned that the jump in energy prices and fallout from sanctions “will complicate the ability of central banks on both sides of the Atlantic to engineer a soft landing from the pandemic inflation surge.”Economists have been warning that a “soft landing” — in which central banks guide the economy onto a sustainable path without causing a recession — might be difficult to achieve when prices have taken off and monetary policies across much of Europe and North America may need to readjust substantially.“The shock of war adds to the enormous challenges facing central banks worldwide,” Isabel Schnabel, an executive board member at the European Central Bank, said during a Bank of England event on Thursday. She added that policymakers were monitoring the situation in Ukraine “very closely.”Inflation is high around much of the world, and though it is slightly less pronounced in Europe, and E.C.B. policymakers are reacting more slowly to it than some of their global counterparts, recent high readings there have prompted some officials to edge toward policy changes.In America, the Fed has sometimes reacted to global problems by cutting borrowing costs, making money cheaper and easier to obtain, rather than by lifting interest rates and making credit conditions tighter. But economists said this time was likely to be different.Russia’s Attack on Ukraine and the Global EconomyCard 1 of 6A rising concern. More

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    What Russia's Conflict in Ukraine Means for the U.S. Economy

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    Russia’s threatened invasion of Ukraine could have economic repercussions globally and in the United States, ramping up uncertainty, roiling commodity markets and potentially pushing up inflation as gas and food prices rise around the world.Russia is a major producer of oil and natural gas, and the brewing geopolitical conflict has sent prices of both sharply higher in recent weeks. It is also the world’s largest wheat exporter, and is a major food supplier to Europe.The United States imports relatively little directly from Russia, but a commodities crunch caused by a conflict could have knock-on effects that at least temporarily drive up prices for raw materials and finished goods when much of the world, including the United States, is experiencing rapid inflation.Global unrest could also spook American consumers, prompting them to cut back on spending and other economic activity. If the slowdown were to become severe, it could make it harder for the Federal Reserve, which is planning to raise interest rates in March, to decide how quickly and how aggressively to increase borrowing costs. Central bankers noted in minutes from their most recent meeting that geopolitical risks “could cause increases in global energy prices or exacerbate global supply shortages,” but also that they were a risk to the outlook for growth.The magnitude of the potential economic fallout is unclear, because the scope and scale of the conflict remain anything but certain. But a foreign conflict could further delay a return to normalcy after two years in which the coronavirus pandemic has buffeted both the global and U.S. economies. Tension between Russia and Ukraine is escalating when American consumers are already contending with quickly rising prices, businesses are trying to navigate roiled supply chains and people report feeling pessimistic about their financial outlooks despite strong economic growth.“The level of economic uncertainty is going to rise, which is going to be negative for households and firms,” said Maurice Obstfeld, a senior fellow at the Peterson Institute for International Economics. He noted that the effect would be felt most acutely in Europe and to a lesser degree in the United States.A major and immediate economic implication of a showdown in Eastern Europe ties back to oil and gas. Russia produces 10 million barrels of oil a day, roughly 10 percent of global demand, and is Europe’s largest supplier of natural gas, which is used to fuel power plants and provide heat to homes and businesses.The United States imports comparatively little Russian oil, but energy commodity markets are global, meaning a change in prices in one part of the world influences how much people pay for energy elsewhere.It is unclear how much a conflict would push up prices, but energy markets have already been jittery — and fuel prices have risen sharply — on the prospect of an invasion.If oil increases to $120 per barrel by the end of February, past the $95 mark it hovered around last week, inflation as measured by the Consumer Price Index could climb close to 9 percent in the next couple months, instead of a currently projected peak of a little below 8 percent, said Alan Detmeister, an economist at UBS who formerly led the prices and wages section at the Fed.“It becomes a question of: How long do oil prices, natural gas wholesale prices stay elevated?” he said. “That’s anybody’s guess.”The $120-a-barrel mark for oil is a reasonable estimate of how high prices could go, said Patrick De Haan, head of petroleum analysis at GasBuddy. That would translate to roughly $4 per gallon at the pump on average, he said. It might be difficult to determine how much of the change in energy prices is attributable to the budding conflict. Omair Sharif at Inflation Insights noted that oil and gas prices had already been going up this year.“I don’t know when you want to start the clock on Ukraine becoming a major headline,” Mr. Sharif said. Plus, from an American inflation perspective, how much the conflict matters “all depends on how much the United States gets involved.”Oil may be the major story when it comes to the inflationary effects of a Russian conflict, but it is not the only one. Ukraine is also a significant producer of uranium, titanium, iron ore, steel and ammonia, and a major source of Europe’s arable land.Trucks loaded with wheat at the port. Russia and Ukraine together make up nearly 30 percent of global wheat exports.Brendan Hoffman for The New York TimesChristian Bogmans, an economist at the International Monetary Fund, said a conflict in Ukraine could further inflate global food prices, which were set to stabilize after skyrocketing last year.Russia and Ukraine together are responsible for nearly 30 percent of global wheat exports, while Ukraine alone accounts for more than 15 percent of global corn exports, he said. And many of Ukraine’s growing regions for wheat and corn are near the Russian border.The rising price of gas and fertilizer, as well as droughts and adverse weather in some regions, like the Dakotas, had already helped to push up the global price of wheat and other commodities. Ukraine is also a significant producer of barley and vegetable oil, which goes into many packaged foods.“In case of a conflict, production might be interrupted, and shipping may be affected as well,” Mr. Bogmans said. If other countries impose sanctions on Russian food items, that could further limit global supplies and inflate prices, he said.But because food costs make up a small portion of inflation, that may not matter as much to overall price data, Mr. Detmeister at UBS said. It is also hard to guess exactly how import prices would shape up because of the potential for currency movements.The Ukraine Crisis’s Effect on the Global EconomyCard 1 of 6A rising concern. More

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    Russia’s Moves in Ukraine Unsettle Energy Companies and Prices

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    Oil and gas prices are up, and Western energy giants with operations and investments in Russia could find it harder to keep doing business there.Russia’s recognition of two breakaway regions in eastern Ukraine could threaten important investments of Western oil giants and further drive up global energy prices in the next few weeks.Since the closing days of the Cold War, Russia’s energy-based economy has become entwined with Europe’s. European energy companies like BP, TotalEnergies and Shell have major operations and investments in Russia. Though expansion of those holdings was largely halted after Russia’s 2014 annexation of Crimea, they remain important profit centers and could now be at risk.Seeking to isolate President Vladimir V. Putin of Russia, President Biden and the European Union imposed new sanctions on the Russian government and the country’s political and business elite on Tuesday. The measures do not directly target the energy industry. That’s why oil and gas prices settled only modestly higher on Tuesday afternoon in New York.But analysts said the energy industry could still be hurt if the crisis dragged on, particularly if Mr. Putin decided to send troops into the rest of Ukraine or sought to take control of the capital, Kyiv. Such aggressive action would most likely force Mr. Biden and other Western leaders to ratchet up their response.European leaders are already taking aim at some Russian energy exports. Chancellor Olaf Scholz said on Tuesday that Germany would halt certification of the Nord Stream 2 pipeline, which is supposed to deliver Russian gas. The decision will not have an immediate impact on European energy supplies because the pipeline is not yet operating. But Russian gas shipments through Ukraine could be halted, especially if Mr. Putin’s troops push farther into Ukraine or if he cuts off gas to Europe in retaliation for Western sanctions.Russia supplies one out of every 10 barrels of oil used around the world. After Western officials said Russian troops had entered eastern Ukrainian regions held by separatists, oil prices quickly jumped early Tuesday to nearly $100 a barrel, their highest level in more than seven years, before moderating.Energy experts say oil prices could easily rise another $20 a barrel if Mr. Putin seeks to occupy more or all of Ukraine. Such an outcome would also cause huge problems for Western oil companies that do business in Russia.“In that environment, the legal and reputational risk faced by Western energy companies operating in Russia will rise sharply,” said Robert McNally, who was an energy adviser to President George W. Bush and is now president of the Rapidan Energy Group, a consulting firm. “For oil markets, this means slower supply growth and even tighter global balances and higher prices in the coming years.”TotalEnergies, which is based near Paris, owns nearly 20 percent of Novatek, Russia’s largest liquefied natural gas company, and Shell has a strategic alliance with Gazprom, Russia’s natural gas monopoly.The Salym oil field, which Shell operates jointly with Gazprom in western Siberia.Alexander Zemlianichenko Jr./BloombergThe Western oil company most involved in Russia is BP, which owns nearly 20 percent of Rosneft, the state-controlled energy company managed by Igor Sechin, who is widely considered a close Putin ally and adviser. BP’s chief executive, Bernard Looney, and its former chief executive Bob Dudley sit on Rosneft’s board with Mr. Sechin and Alexander Novak, Russia’s deputy prime minister.Rosneft contributed $2.4 billion in profits and $600 million in dividends to BP in 2021, and has a secondary listing on the London Stock Exchange. About a third of BP’s oil production, or 1.1 million barrels a day, came from Russia last year.BP executives have so far expressed calm. “We have been there over 30 years and our job is to focus on our business, and that is what we are doing,” Mr. Looney said in a recent conference call with analysts. “If something comes down the road, then obviously we will deal with it as it comes.”Most oil companies have been reporting bumper profits because of rising oil and gas prices. European firms are using some of their profits to invest more in wind, solar, hydrogen and other forms of cleaner energy. But the current crisis could be a major distraction, if not worse.Doing business in Russia has always been complicated, especially as Mr. Putin reasserted state control over energy, squeezing private investors.Shell was forced to give up control of its premier Russian liquefied natural gas project on Sakhalin Island, in eastern Russia, to Gazprom in 2006. Shell retains a modest stake in the facility, and it appears to want to keep the door open to more business in Russia. Along with four other European companies, it helped finance the estimated $11 billion Nord Stream 2 pipeline to Germany.TotalEnergies has continued investing in a $27 billion natural gas complex in the Yamal Peninsula, in the Arctic, that Novatek controls. The project sidestepped earlier Western sanctions by obtaining financing from Chinese banks. It began producing gas for European and Asian customers in 2017.Share prices of BP and Total closed on Tuesday down more than 2 percent, and Shell was down about 1 percent.Prospects for Western oil companies seeking to do business in Russia were once far brighter. Exxon Mobil, Italy’s ENI and other foreign oil companies teamed up with Rosneft in 2012 and 2013 to explore Arctic oil and gas fields.BP owns nearly 20 percent of Rosneft, which operates this refinery in Novokuibyshevsk, Russia.Andrey Rudakov/BloombergBut U.S. and European Union sanctions imposed after Russia’s seizure of Crimea forced many Western companies to stop expanding in Russia in part by limiting access to financing and technology for deepwater exploration.Exxon formally abandoned exploration ventures with Rosneft in 2018, and took a $200 million after-tax loss.Understand How the Ukraine Crisis DevelopedCard 1 of 7How it all began. More