Small island developing states (SIDS), a category which includes Caribbean countries, is a group which is at considerable and increased risk from the global fallout resulting from the Russian invasion of Ukraine.
The SIDS are among the most vulnerable countries in the world because of a unique combination of characteristics. As very small, highly open economies, they are powerless against external events over which they have no control; at the mercy of climate change, particularly sea level rise caused by global warming; and are unusually exposed to pandemics.
The SIDS have shown resolve and resilience in coping with the global financial crisis after 2008 and the novel coronavirus pandemic. Having survived, they are now facing another crisis of global origin and proportions.
The Russian invasion of Ukraine will disrupt supplies and the price of import products on which the majority of SIDS are almost totally dependent. For example, SIDS already have a 90 per cent dependency on petroleum fuels for commercial energy costing more than US $ 220 billion per year pre-Covid-19.
Demand for oil is certainly going to increase, as it already has in the first four weeks of the invasion, and there is no way to predict how long the conflict will last.
There is the distinct possibility of supply disruptions because of capacity and disrupted logistics.
The application of force majeure will create uncertainty, recalling that turmoil in energy market disruptions pushed oil prices to US $ 150 per barrel in 2008. Oil price increases will lead to spikes in gasoline prices and in international and domestic transport, and these will be passed on to producers and consumers.
SIDS will now face a significant escalation in the cost of food imports, as almost all SIDS import 60 per cent or more of their food needs. Russia and Ukraine are major global producers in food markets. Together, the two represent 53 per cent of the share of global trade in sunflower oil and seeds, 27 per cent of the share of global trade in wheat, 23 per cent of barley, and 14 per cent of corn.
Corn is the feedstock for animal feed which will affect the price of chicken meat.
Still, as some savvy business leaders have often advised, “never waste a good crisis”. It’s time to make a serious effort to reduce the use of fossil fuels and ramp up use of solar and wind-generated energy.
A wise government would start by cutting taxes to encourage investment in solarisation and wind-aided power.
It’s nigh time to make a concerted effort at increasing food production within the Caribbean Community. This is something the regional body has been talking about since its inception. A prime target is to put some of the agricultural lands that used to be planted in sugar cane into food production, even while building up housing and commercial stocks.
It’s time to ramp up pragmatic planning to meaningfully increase economic resilience in SIDS because this will not be the last challenge emerging from global events.
Fortunately, we have the vital tourism industry which should continue its upward trend in demand, especially in the main source countries, now that the world is opening up after the onslaught of the pandemic.