Three years after its outbreak, the effects of the Russian-Ukrainian conflict continue to unfold, and even extending the impact to previously unaffected economic sectors. This is hardly surprising given the stalemate in finding a peaceful resolution to a crisis that has inflicted such significant harm on the global economy.
The EU faces a particular challenge, as does the Russian economy, which so far has managed to weather the harsh sanctions thanks to its vast natural resources, notably oil and gas.
The Ukrainian economy, heavily reliant on agriculture, particularly grain production, has seen an increased dependency after the war ravaged numerous factories and their infrastructure and disrupted its trade through Black Sea ports.
Easy entry for Ukraine agri-produce
In response, the EU member-countries opened their land borders to facilitate the flow of inexpensive Ukrainian agricultural exports. This presented a formidable challenge to the EU's agricultural sector, leading to a drop in prices of local produce amidst an inflation plagued these countries over the past three years and driving up production costs.
European farmers must also contend with taxes and high energy costs. They have experienced substantial losses, while consumers, grappling with surging inflation, are actively seeking lower prices to manage expenses.
A wave of protests initiated by farmers across EU countries began two years ago, starting in Hungary and Poland, which border Ukraine. Initially, their impact was limited due to the relatively minor influence these countries hold within the EU's institutional framework.
EU farmers' ire spreads
Over the past month, the movement has escalated to involve major EU nations like France and Italy, where agriculture forms a significant portion of the national economy. The farmers in these countries have united with their counterparts in Poland and Hungary. Their demonstrations have taken on a more expansive scope, posing significant disruptions to European economies.
In dramatic displays of dissent, farmers blocked major roadways leading to ports in the capital cities, including Paris, with thousands of tractors causing a standstill in commerce and transportation both within these countries and inter-EU.
This period of unrest coincides with the EU's commitment to allocate a further 50 billion euros to Ukraine over the next four years, a critical support package Kiev desperately needs to prevent its economy from collapsing. Following the approval of this aid package, despite Hungary's objections, President of the European Council, Charles Michel, said, "This aid represents a lifeline for Ukraine."
This decision has exacerbated the frustration among farmers who feel overlooked and more deserving of support. The discontent has spurred a growing number of European farmers to join the protests, using the peaceful blockade of main roads with tractors as a tactic to address their grievances.
They are calling for measures including customs duties on EU imports of Ukrainian agricultural products and goods, which have become fiercely competitive in European markets.
EU needs to tackle this angst
The EU finds itself at a crossroads amid these expanding protests, which over time have begun to disrupt additional economic activities. The absence of transportation threatens to halt trade, potentially leading to widespread repercussions across sectors. It's important to note that the agricultural product crisis predates the Ukrainian conflict, signalling a deeper, longstanding issue.
The crisis initially manifested within the EU itself, driven by disparities in production costs across member states, such as lower costs in Poland and Bulgaria versus higher costs in France. This discrepancy led to significant price variances between their products, all moving freely within the EU thanks to the European Common Market, which facilitates barrier-free movement of goods and services.
Compromises were reached, and some support was extended to the agricultural sector to mitigate these differences, as protectionist measures against goods from member states were not an option.
However, the situation with Ukrainian goods introduces a new complexity, given Ukraine's non-membership in the EU. This difference necessitates alternative solutions, such as seeking a peaceful resolution to the crisis to diminish costs, while providing support to farmers, as was the case in the years preceding the conflict.
Without such measures, the risk looms of further economic crises that could impact not only the European economy but also the global economy, due to their intricate interconnections.
