2022 had barely begun when the world was thrown headfirst into a new global crisis following the already difficult years of the Covid-19 pandemic. With Russia’s invasion of Ukraine in January of this year, much has been discussed about the current and future economic implications of the conflict – and the situation may become even more complicated soon.
The ramifications of the crisis will not be limited to businesses, but will likely affect citizens all over the world in many different ways, some expected, others less so. In fact, it could affect everything from mortgage payments to food prices and pension fluctuations. But not all countries will face the same challenges.
“The war in Ukraine, regardless of the outcome and hoping for its rapid resolution, will have a very negative impact on the world economic situation. Russia will suffer the most from this, and not only for the sanctions it has already been hit by,” argues Joao Vale e Azevedo, Chairman of KUNST Global, one of the world’s largest equity firms.
According to the expert, Russia’s current path towards bankruptcy will have ramifications for the whole of the Western world, bringing greater market instability, rising energy prices and a further increase in inflation. Moreover, Europe will be the focus of the crisis, as many countries will also need to manage an unprecedented wave of refugees. In this scenario, the rising inflation rate is perhaps the number one issue, followed by the commodity crisis.
But the third and perhaps most important problem, especially for Europe, is the price of energy. What was thought to be an issue that would be unavoidable in the future is now a glaring problem of the present: electricity and gas bills have already skyrocketed, families and companies – already suffering from the pandemic – don’t know how to cope with the increases.
“European governments promise immediate solutions, but these are just band aids with which they hope to heal a much deeper wound. We are paying the price for a sustainability-oriented energy policy interested only in seeking an easy consensus in the media and in the less prepared public opinion, which has failed to foresee the long-term consequences. A change in the energy paradigm such as that from coal to gas or from oil to electricity requires enormous investments: apart from propaganda, nothing has been done to make this possible, nor is it clear what are the costs of a similar operation. We wanted to start an epochal revolution, but we are completely deprived of the infrastructure and funds necessary to organize and manage it, and now governments/energy companies are trying to pass these enormous costs onto businesses and families. It is an unmanageable situation,” explains Azevedo.
The Chairman of KUNST Global also argues that present politics lacks long-term vision, as politicians are bound by very tight electoral cycles, while the situation we are in would need very difficult decisions and measures that require years of implementation to give good results. Thus, managing today’s challenges becomes practically impossible.
“Furthermore, over time, a strange mentality has formed. It seems that when you are faced with a theoretically correct idea, it must be implemented immediately, at any cost, without worrying about the practical aspects. Unfortunately, things have never worked like this, the reality is much more complex,” Azevedo ponders.
In this ongoing crisis, it’s important to remember that there is often a light at the end of the tunnel, and the bonds strengthened by the international community’s response to the pandemic as well as to the ongoing war may prove effective in looking for a way out.
“Due to the past two years, people are more aware that they are part of a community. The fact that we have had fewer opportunities for interaction has meant that we are now more aware of the value of those interactions, and probably also of human life. We are a stronger community. The challenges that await us are very difficult, but together we are much better prepared to face them,” concludes the Chairman of KUNST Global.
