Finance Minister Avigdor Liberman warned Monday that the war in Ukraine, following Russia’s invasion last Thursday, will likely have a global economic impact including in Israel, as the Economy Ministry said the crisis may result in more expensive imports.
“The war in Ukraine will have economic consequences for the State of Israel and for the whole world,” said the finance minister at a Knesset faction meeting for his Yisrael Beytenu party Monday, adding that the Israeli economy was in “good shape and there is no need to worry.”
The Ministry of Economy and Industry said Sunday that there have been no disruptions so far to trade of goods and services with Ukraine and Russia, respectively, amid the ongoing Russian invasion of its western neighbor, but warned that price increases on imports to Israel may be in the offing.
The ministry did not specify which goods may see price jumps as the crisis — currently in its fifth day — threatens to disrupt the global supply chain, but Ukraine is a major exporter of wheat and other grains to Israel and the wider Middle East.
Russia is the world’s largest supplier of wheat and Ukraine accounts for around 12 percent of global supply, according to the US Department of Agriculture.
Many countries including Lebanon and Egypt depend heavily on wheat imports to provide subsidized bread to its population.
According S&P Global Platts, Ukrainian wheat exports between July 2021 and June 2022 were projected to reach 22.5 million metric tons. The US Department of Agriculture forecasted the country’s wheat exports at 24.2 million metric tons for that period.
According to an assessment Sunday by Economy Ministry director-general Ron Malka, a shortage of essential goods was not expected, but “there may be price increases due to supply difficulties resulting from the fighting in Ukraine,” the ministry said in a statement.
The government body said it is coordinating situational assessments on economic matters with the Manufacturers Association of Israel, the Federation of Israeli Chambers of Commerce, Israeli companies operating in Ukraine, and other government ministries.
Bilateral trade between Israel and Ukraine stood at nearly $800 million in 2020, according to the Economy Ministry — some $650 million in imports from Ukraine and about $135 million in exports to the country from Israel. Between January and September 2021, trade between the two countries reached $619 million.
A majority of Ukrainian imports to Israel (67%) in 2020 were raw agricultural materials like grains, and food products, while most exports from Israel to Ukraine (62%) were chemical and industrial products, according to data provided by the ministry citing the Central Bureau of Statistics (CBS).
Agricultural and food imports from Russia to Israel were about 15% in 2021, according to the data, but bilateral trade between the two countries is on a larger scale.
A majority of imports from Russia in 2021, which amounted to some $2.4 billion, were minerals, gems, and precious metals. At least half of exports from Israel to Russia in 2021 were agricultural materials, food products, and medical and optical equipment.
Israeli exports of “services,” a loose term used in CBS data that includes Israeli business consulting and technology services like cybersecurity and artificial intelligence, to Russia were valued at $174 million in 2021, while imports of services from Russia were worth $145 million that year.
Israeli exports of services to Ukraine amounted to some $65 million, according to the latest available data in 2020, while imports of services from the country stood at $78 million.
Sanctions start to bite
Russia’s central bank sharply raised its key rate Monday in a desperate attempt to shore up the plummeting ruble and prevent the run of banks amid crippling Western sanctions over the Russian war in Ukraine.
The ruble plunged to a record low of less than 1 US cent in value as Russia was cut off from the global bank payments system in retaliation for Moscow’s invasion of its neighbor.
The bank hiked the benchmark rate to 20 percent from 8.5%. That followed a Western decision Sunday to freeze Russia’s hard currency reserves, an unprecedented move that could have devastating consequences for the country’s financial stability.
It was unclear exactly what share of Russia’s estimated $640 billion hard currency coffers would be paralyzed by the decision by Western nations to block Russian banks from the SWIFT global payment system. European officials said that at least half of it would be affected.
That dramatically raised pressure on the ruble by undermining the financial authorities’ ability to conduct hard currency interventions.
Last week, China came to Russia’s aid by finalizing approval for wheat imports from all regions of Russia, giving Vladimir Putin an alternative to Western markets that might be closed under Western sanctions.
Russia has largely been shut out of the wheat market in China until now due to concern about possible fungus and other contamination.
China and Russia announced an agreement earlier this month for China to import Russian wheat and barley after Putin became the highest-profile foreign guest to attend the Beijing Winter Olympics.
Chinese ties with Russia have grown stronger under President Xi Jinping. China’s multibillion-dollar purchases of Russian gas for its energy-hungry economy have been a lifeline to Putin, who already was under Western sanctions over its 2014 seizure of Crimea from Ukraine.
AP contributed to this report.