Drone footage of Bakhmut showed how the longest battle of the year-long Russian invasion had turned the city in eastern Ukraine into a ghost town. Video / AP
The economic jolt to Kiwis when Russia invaded Ukraine one year ago has been tempered but the war’s expansion would bring more pain for local business and consumers.
The war has New Zealand now navigating two global camps, with political allegiance to Ukraine and the West but strong economic tiesto China, a country more sympathetic to Russia.
ANZ chief economist Sharon Zollner said Vladimir Putin’s invasion last February initially caused a big jump in the price of oil.
“Prices have actually come back a long way. Essentially the shock has very much dissipated.”
Zollner said countries recently encountering double-digit inflation were frequently those more dependent on Russian energy imports or more exposed to oil price volatility.
Ukraine is a major grain producer and the Russian blockade of Black Sea ports choked some cereal exports. The war also added volatility to fertiliser prices.
“Again, that wasn’t as persistent as initially feared,” Zollner added.
Turbulence in global food prices could hurt domestic consumers but high prices could also benefit New Zealand, which is a major exporter of dairy products, lamb, venison, beef, and kiwifruit.
“New Zealanders are on both sides of the equation ... We got some of it back.”
Countries more dependent on food imports were more exposed than New Zealand.
The war shows no sign of ending, but Zollner said if the conflict was contained, economic impacts should be too.
New Zealand and Russia are not major trading partners. A nascent free trade deal proposal was scrapped in 2014 when Moscow annexed Crimea.
“We don’t export or import much from Russia - a bit of butter, a bit of wine,” Zollner said.
New Zealand imposed a 35 per cent tariff on all imports of Russian origin and placed sanctions on Russian officials, especially military and political elites.
Kiwi parliamentarians have shown solidarity with Ukraine. One measure of the unity is evident in Russia’s decision to blacklist every MP.
The ban on MPs was perhaps the only coherent response to New Zealand’s economic and military support for Ukraine.
The Kremlin has otherwise lashed out by blacklisting some Kiwi journalists, academics, corporate executives and officials seemingly picked at random.
Russia's invasion has brought untold hardships to many Ukrainians. Photo / Ivor Prickett
Zollner said the current situation had much of the world demarcated on lines akin to a new Cold War.
She said China and Russia had turbocharged their bilateral trade, as Moscow grew more dependent on Beijing.
“Obviously New Zealand is in one camp strategically and another camp trade-wise, so that’s an awkward spot to be in. The repercussions of that could be longer-lasting.
‘If everything stays at the status quo the impacts will dissipate,” Zollner added.
But there is a wildcard.
A new oil price shock sparking inflation concerns might drive central banks to raise lending rates more, putting pressure on people with loans and mortgages.
“Everyone is assuming the oil price stays down where it is now.”
That was a reasonable assumption, Zollner said.
“But geopolitics doesn’t always stay reasonable.”
Some NZX-listed companies have cited the war as an influential factor in recent results.
The Port of Tauranga today said the armed conflict was causing widespread disruption and could weigh heavily on its second-half results this year.
South Port director and chairman Rex Chapman earlier this month said the conflict had affected the Bluff business.
“The war in Ukraine, the rate of economic recovery in China and the threat of a global recession are impacting marketplaces and this has a flow-on impact on commodity prices,” Chapman said.
“The container supply chain is still disrupted and although expectations are that it will improve, the timing is unclear.”
An increasingly polarised global political situation was also alluded to in a Treasury paper written last year on the war’s long-term impact.
“As an exporter of primary products, higher food prices will be beneficial for New Zealand exporters, but lower global growth forecasts and other countries’ measures to secure their food supply such as export bans may pose risks in the longer term.”
Prices for oil, natural gas, wheat, maize, some fertilisers and some metals spiked sharply following the invasion, but had stabilised within six months, Treasury added.
Containing the war and isolating Russia was needed to avoid broader geopolitical and economic damage, the authors added.
SOS: Send our Socks
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