Impact of War on Economy and Geopolitical Relations

Presented By :-
 DEVANSH DAYMA

HE ADDED HIS VALUE IN RESEARCH

FOR DE-DOLLARIZATION AND
HELPED THE TEAM WITH HIS IDEAS
 HARSHITA TODI
SHE ADDED HER VALUES IN THE
SEARCH ABOUT GOVERNMENT
SPENDING AND CURRENCY
INSTABILITY DURING WAR.
 SAMEER TANWAR
HE ADDED HIS VALUES IN
RESEARCH ABOUT USA, EUROPE
AND ARAB COUNTRIES ROLE IN
GEOPOLITICS.
BHUMIKA GOYAL
SHE ADDED HER VALUES IN
RESEARCH ABOUT WORLD TRADE
DISRUPTIONS DURING WAR AND
HELPED THE TEAM WITH HER
CREATIVE IDEAS.
 SUNNY KUMAR
HE ADDED HIS VALUE IN RESEARCH
ABOUT INDIA'S ROLE IN
GEOPOLITICS AND GAVE US AND
WAS INVOLVED WHOLE HEARTEDLY
WITH OTHER TEAM MEMBERS FOR
THEIR CONTENT.
 VAIBHAV SINGH
HE ADDED HIS VALUES IN RESEARCH
ABOUT FOREIGN INVESTMENTS AND
RECONSTRUCTION COST AFTER WAR
AND HELPED OTHER TEAM MEMBERS
IN RESEARCH ABOUT THEIR
RESPECTIVE TOPICS.
 RISHU RANJAN

HE HELPED THE TEAM WITH IDEAS

AND MANAGING THE TEAM AND
OVERVIEWING THE PROGRESS OF
WORKS
 CHIRAG SONWAL

HE ADDED HIS VALUE IN MAKING

THIS PPT IN AN EXCELLENT WAY
AND HELP THE TEAM WITH HIS
CREATIVE IDEAS.
1. Government Spending
Government spendings Government spendings during wars
normally
Education, healthcare, infrastructure, Weapon purchasing, military
public welfare schemes, research and deployment, armed forces, fighter jets,
development, Technology security of nation etc
enhancement, etc

3
Case study of Ukraine Expenditure 15

FY2023 :
9
Ukraine is spending most of its money on war and
things related to war and hence it is not focusing 55
on improving living facilities for its public and 6
hence Ukraine’s people are getting affected
5

Security and Defence 9Debt Service Economic Activity Health Care

General Public Fuctions Social Welfare Others

2. Reconstruction Cost

• High capital Costs: Rebuilding damaged infrastructure requires significant capital

investment
• Funding sources: Government may rely on loans grants and international aid
leading to increased public debt and long term financial obligations.

• Opportunity Cost: Resources allocated for

rebuilding infrastructure could have been invested
in another critical areas such as education
healthcare public welfare scheme
• Human capital: Lost of humans cannot be
compensated ever

Some Stats Related To Some Countries

• Ukraine Recovery and reconstruction is estimated around $486 billion over the next
decade
• Just few days of war between Israel and Palestine costed Israel Palestine over $50
billion on its reconstruction
3. Currency Instability
• Destruction of Infrastructure, Disruption of trade and Increased government
spending can all contribute to currency instability
• Investors are hesitant to put their money into countries with volatile currency and
that’s why export of that country goes down and currency faces instability in that
country.
Ukraine Case Study:
Ukraine (2014–Present): The
Ukrainian currency faced severe
depreciation due to the conflict with
Russia. Before the war in 2013, the
exchange rate was 1 USD = 8 UAH. By
the end of 2014, 1 USD = 15.8
UAH. In 2015, the exchange rate
continued to deteriorate, reaching 1
USD = 25 UAH. The 2022 full-scale
invasion caused further depreciation,
with the exchange rate reaching 1 USD
= 36 UAH by early 2022, and at
times exceeding 40 UAH per USD.
4. Foreign Investment
• Foreign investment is important because it brings capital which can be used to
improve infrastructure create jobs increase economic growth and enhance
technology transfer.
• War can cause imposement of various sanctions which can lead a country for
worse economic condition and reducing FDI prospects.
• Foreign investors may withdraw their capital to avoid losses further it weakens the
economy.
Case Study Of Ukraine:
• According to UNCTAD World investment report 2023 FDI flows to Ukraine fell to
$848 Million in 2022, down from $7.3 Billion one year earlier, due to the
effect of the Russian invasion of the country in the same year the total stock of fdi
stood at usd 5 1.1 billion
Foreign Direct Investment 2021 2022
FDI Inward Flow (million USD) 7,320 848 *Greenfield investments are a form of
FDI Stock (million USD) 65,746 51,118 FDI of where parent company starts a
new venture in a foreign country by
Number of Greenfield Investments 78 31 constructing a new operational
Value of Greenfield Investments (million USD) 2,333 975 facilities from the ground up.
5. World Trade Disruption
• Wars can create tension between countries and that’s why trade roots and supply
chains often get affected by it.
• Increased cost of raw materials due to scarcity can increase price of final product
and hence inflation may occur.
• Decreased FDI in conflict zones leads to shift towards local production and hence
trade hampers.
• Increased uncertainty leading to stock market malfunctions and impact on global
financial markets.

Case study of Russia Ukraine war:

• Black Sea Blockades: Blocked Ukrainian ports disrupted grain exports, causing global food
shortages and price hikes.
• Sanctions on Russian Goods: Western sanctions rerouted Russian shipments to Asia, increasing
transport costs.
• Energy Price Surge: Europe’s shift from Russian gas raised global energy prices and shipping
costs.
• Insurance and Security Costs: Higher insurance premiums near conflict zones increased
shipping expenses.
• Trade Corridor Disruptions: Shortages of metals, fertilizers, and chemicals affected global
industries, raising costs.
A. India’s Stand In Geopolitics
• India is quite neutral with Its stand Regarding all things happening in this world
India knows to have good relation with west and maintain its good relationship
with its old alliances.
• India’s response to Russia’s invasion on Ukraine was unique. They condemned the
civilian killings strongly but they didn’t vote in UN to maintain good ties with
Russia.
• India has continued to purchase oil from Russia despite sanctions imposed by
western countries.
• India has even strongly condemned terror attacks on Israel on October 7 and also
loss of civilian lives in ongoing Israel conflict. India has called for ceasefire and
sustained humanitarian assi to people of Gaza. India emphasised for peaceful
resolution of conflict through dialogues. Even Israel shared concerned about
terrorism and regional instability.
• But India is having some ongoing border standoff with China and it has increased
tension and stress between two countries. Despite India’s effort to boost local
manufacturing country remains heavily dependent on China’s industrial import.
India's participation in QUAD along with US, Japan and Australia is seen as counter
balance to China’s going into US
B. Europe’s stand on Russia Ukraine War:
• Sanctions: Imposed comprehensive sanctions on Russian industries and exports.
• Military & Economic Aid: Provided over €30 billion in military aid and €19 billion in
economic support to Ukraine.
• NATO Strengthening: Increased defense budgets, secured Finland and Sweden’s
membership, reinforced eastern borders.
• Humanitarian Support: Hosted millions of refugees and provided essential aid to
Ukraine.
• Energy Shift: Cut Russian gas
imports by 50%, investing in
alternatives like LNG and
renewables.
• Global Diplomacy: Pushed for
Russia’s isolation in international
forums, rallying global
support for Ukraine.
C. Arab’s Stand On Israel Palestine War
1. Egypt: Signed peace with Israel in 1979 but supports Palestinian statehood.
2. Saudi Arabia: Supports Palestinian statehood, with a cautious approach towards
Israel..

3. UAE: Normalized relations with Israel in 2020 (Abraham Accords), while still
supporting Palestine.
4. Qatar: Supports Palestinian factions (especially Hamas), informal ties with Israel.
5. Iraq: Supports Palestinian statehood, opposes Israel.

6. Jordan: Signed peace with Israel in 1994 but advocates for Palestinian rights.

7. Bahrain: Normalized relations with Israel in 2020, supports Palestinian statehood.

8. Lebanon: Does not recognize Israel, supports Palestinian resistance.
9. Syria: Opposes Israel, supports Palestinian resistance movements. Algeria: Strong
supporter of Palestinian independence, no relations with Israel.
 D. United States: Epicentre of Geopolitics
• Largest Economy: $26 trillion GDP (24% of global economy) and top recipient of
FDI ($318 billion).
• Defense Budget: $877 billion annually (39% of global military spending) with over
750 overseas bases.
• Top in Tech: U.S. tech giants lead globally; invests $700 billion in R&D yearly.
• Top Oil and Gas Producer: Leading in production with significant renewable
investments ($114 billion in 2022).
• NATO & Diplomacy: Leads NATO, provides $51 billion in foreign aid, and has a vast
diplomatic network.

Case Study Of Russia Ukraine War

• Over $43 Billion in Military Aid: Includes

Javelin missiles, HIMARS, Patriot systems.
• Economic Aid: Over $28 billion to stabilize
Ukraine’s economy.
• Sanctions on Russia: Reduced Russian oil
exports by ~30%
• Defense Industry Boost: Over $4 billion in
contracts for replenishing and new supplies.
De-Dollarization:
• De-dollarization is the reduction of reliance on the U.S. dollar in global trade, finance, and
reserves, with countries shifting to other currencies like the euro or yuan.

Impact on the U.S.:

1. Reduced Demand for USD: Less global need for dollars weakens its role as the primary reserve
currency.
2. Higher U.S. Interest Rates: Lower demand for dollars could lead to increased borrowing costs.
3. Loss of "Exorbitant Privilege": The U.S. would lose its ability to borrow cheaply.
4. Weakened Economic Influence: Reduced leverage in global trade and financial negotiations.
5. Shifting Trade Patterns: Trade could move to other currencies, affecting U.S. exports.
6. Diminished Global Financial Power: U.S. influence in global institutions would decline.

Conclusion:
• De-dollarization could reduce U.S. economic power by weakening the dollar’s global dominance,
increasing costs, and diminishing geopolitical influence.
Thank you
Fo r p a y i n g a t t e n t i o n