Author: caribbeantradelaw

Renaldo Weekes, Guest Contributor

Image by Wilfried Pohnke from Pixabay

On February 24^th, 2022, President of the Russian Federation Vladimir Putin began a large scale invasion of Russia’s neighbour, Ukraine. Many Western governments have been warning of this invasion sometime before it took place and the world waited in anticipation to see if it would actually happen. Now, everyone’s worst fears have been realized. Of course, focus will be on the safety of Ukrainians and all other persons who were caught in the midst of the ongoing invasion. However, there are other effects of the invasion that can be economically damaging for the rest of the world and of course, the Caribbean. Those are: the price of oil, the diversion of aid away from the other parts of the world and potential sanctions.

The price and supply of oil

One of the major and most noticeable effects from Russian invasion of Ukraine is the substantial decrease in global oil supply and concomitant increase of the price of oil. This came about because Russia, being the second highest producer of oil in 2021, has not been able to supply the global markets due to many companies and countries protesting the Russian government’s decision to invade Ukraine. As such, there has been an embargo of sorts on Russian oil. With an effective decrease in oil supply on the global market, prices have risen. They’ve risen to above $100 USD per barrel with Brent crude trading at $140 USD at one point but it has since dropped below $100 USD.

These increases in oil prices have had a significant impact on the prices of products and processes that heavily rely on oil. For example, gas has reached an all-time high of $4.43 per gallon in the United States (US) while here in the Caribbean, countries have seen increases to all-time highs such as $4.13 BBD per litre in the case of Barbados. The Barbados Light and Power Company announced that the price of electricity will also be increasing. These price increases have concomitant effects on normal everyday services that rely on gas such as food, taxi services and generally any service that requires gas and electricity. This can very much apply to almost services offered in the economy and effectively raises the cost of living at a time when many are still recovering from the pandemic and the Organization of the Petroleum Exporting Countries (OPEC) seems reluctant go against its plan to increase its output in phases.

The rising of oil prices, however, presents opportunities to less advantaged oil producing countries with relatively poor populations. Namely, those in Africa and the Caribbean’s very own Guyana. These countries now have the opportunity to increase their economic fortunes and further develop their societies through social services, infrastructure and the like. Though the projected output of 340,000 barrels a day is nearly not enough to replace Russia’s, a piece of the pie can be considered better than none at all. This is especially likely against the backdrop of world leaders’ search for alternatives to Russian oil, especially those in Europe. For example, it is reported that Prime Minister of the United Kingdom, Boris Johnson has been trying to court the United Arab Emirates and Saudi Arabia in efforts to secure an oil deal though it seems that has not borne fruit thus far.

The diversion of aid away from the other parts of the world

Another considerable effect of the Russian-Ukrainian conflict is diversion of attention and funds away from the Caribbean and other regions that depend on aid from Europe and the US. Understandably, world powers are focused on ensuring the safety and protection of Ukrainians and other persons who are directly affected by the current invasion. However, this means that other parts of the world will be placed on the back burner; possibly for a while as these world powers to deal with the same issues of higher oil and gas prices. This is especially so in the face of what some fear could be the start of global conflict akin to a world war. From that perspective, it is difficult to imagine that world powers have the time, energy or resources to consider the rest of us.

Potential Sanctions

A third impact of the conflict is sanctions. Up to now, all sanctions have been placed mainly on Russian government officials and those close to them, and in some cases on ordinary Russian citizens. So far, Russian oligarchs that have made Europe their second home with the purchase of luxury homes and multimillion dollar yachts have had their assets seized and various companies have stopped offering their services to those still living in Russia. As a result, ordinary Russian citizens have been fleeing to Finland, which borders Russia, and many of the oligarchs who still had access to their yachts have been sailing off to other countries.

Following this, there have been reports that the yacht of Russian oligarch Dmitry Rybolovlev was spotted in Antigua and Barbuda, and subsequently St. Vincent and the Grenadines. Rybololev has been named in the Putin Accountability Bill, a sanctions bill making its way through the United States Congress. Against the backdrop of world powers’ intent of punishing Russian powerholders, it follows that they would also punish anyone who is perceived as helping them. This line of thinking was alluded to in a press release for the US’ No Travel for Traffickers Bill which seeks to discourage Citizenship by Investment Programs which are fairly popular in the Caribbean. The release mentions that “Russia is one of the world’s worst offenders when it comes to using these golden passport schemes as a back door into other countries.” Though the Bill is not related to the current Russian invasion, the release shows that Russia is at the forefront of Congressmen’s minds.

This also begs the begs the question of whether the consequences of visa restrictions resulting from the No Travel for Traffickers Bill could develop into other consequences if the islands do not comply or if they provide what may be deemed as aid to a Russian oligarch. Would simply be docking and being allowed to buy fuel for their yacht be seen as assistance that warrants action as was done in St. Vincent? Maybe not, but it does make one wonder if other oligarchs may make the Caribbean a temporary safe haven or a pit stop on their quest to escape western sanctions and whether allowing them to do such will impact Caribbean islands’ relations with the US and European Union, among others.

Sanctions can also indirectly affect the Caribbean. Russia, as a result of direct sanctions on them, reportedly has been trying to build stronger ties with China, who has its own SWIFT equivalent called the Cross-Border Interbank Payment System or CIPS. Many theorize that Russia will try to join this system and use the Yuan as its reserve currency as a way to help counteract sanctions. Whether or not this is true, increased cooperation between Russia and any other country puts increased focus on the cooperating country and its own assets. As China has been making more investments throughout the world, especially the Caribbean, one has to wonder if this would have any real, potential impact on us. So far, there hasn’t been any real indication that these ties will hinder us but against the backdrop of increasing hypersensitivity to Russia’s actions, Caribbean leaders too must be hypervigilant to the danger that may lurk around the corner, especially as we are considered America’s backyard.

Conclusion

All of these things taken together are concerning considering many are still trying to recover from the pandemic, the Caribbean heavily relies on imports and the general hypersensitivity surrounding the invasion. Though both the Russian and Ukrainian sides have begun peace talks, it doesn’t appear as though those peace talks have resulted in any real ceasefire as yet. With this conflict set to continue for the foreseeable future, leaders must be cognizant of the current and future effects of the conflict as it goes on and what decisions have to be made to ensure the safety and longevity of the region.

Renaldo Weekes is a holder of a BSc. (Sociology and Law) who observes international affairs from his humble, small island home. He has keen interest in how countries try to maneuver across the international political and legal stage.

The views and opinions expressed herein are solely those of the guest author and are not necessarily representative of those of the Caribbean Trade Law & Development Blog.