The day since Putin’s tanks crossed the Ukrainian border on February 24, the economic consequences reverberated across Europe. Even the Belgian economy, almost entirely independent from Russia, did not escape the consequences.
Despite being roughly equivalent to the combined Benelux area, the Russian economy is rich in natural resources. Russia is a leading exporter of timber, oil, gas, aluminium, diamonds, gemstones, gold, palladium, titanium, iron, steel, and uranium, among other precious resources.
As per the data revealed by World Bank, “Before the war, resource rents accounted for around 10.7% of Russia’s total GDP, or roughly $157 billion.”
Russia’s stranglehold on energy exports, suspected manipulation of prices last year, and threats to shut off much of Europe’s energy have sent gas and oil prices to all-time highs.
Many European producers have been forced to significantly reduce or stop production due to the sky-high price of oil, gas, and electricity.
International sanctions and disruptions to logistical networks caused by warfare have all but ended Russian natural resource deliveries to Europe, apart from fossil fuels, which Europe is still reluctant to wean itself away from entirely.
Over two months since the beginning of the war, supply-side issues are now being widely felt by most sectors of the Belgian economy. In March, National Bank of Belgium statistics demonstrated that nearly two-thirds of manufacturing, wholesale, and construction companies were noticeably disrupted.
Many industries are now facing major shortages, rampant inflation, spiralling costs, and paralysed supply chains.
Having lost one of its primary sources of wood imports, the Belgian construction sector has witnessed material prices rise by 16% since the start of the year.
Other crucial materials, such as steel, non-ferrous metals, PVC, and insulation materials, are now facing major shortages. As a result, 62% of construction companies furloughed employees in March and April.
The sudden drop in Russian and Ukrainian wheat and vegetable oil exports has wounded the Belgian food production sector. Certain finished products can easily be replaced or substituted. But when shortages hit grains and oils, no easy substitutes can be found.
In April, around 40% of Belgian food producers announced plans to reduce or halt their business significantly. Bakers, foodstuff manufacturers, livestock producers, and brewers have struggled to keep afloat and are faced with grain shortages.
The Belgian Federal Government recently allowed the food sector a greater degree of flexibility in labelling products due to a severe shortage of grains and oils used to produce much of our processed foods.
Energy shortages also now seem extremely likely. If future sanction packages succeed in coercing European states into a full abandonment of Russian energy imports, then the inflationary pressures will likely continue to rise.
Due to sanctions and shortages, energy traders have warned of energy shortages facing Europe, which will affect consumers and power-hungry industries.