- The ongoing tension between Russia and Ukraine may end up in higher energy and food costs for Kenyan households according to political observers.
- The conflict has sent global oil prices spiralling high and curbed wheat exports leading to inflation, costlier transport, electricity and other manufactured goods.
The ongoing tension between Russia and Ukraine may end up in higher energy and food costs for Kenyan households according to political observers. The conflict has sent global oil prices spiralling high and curbed wheat exports leading to inflation, costlier transport, electricity and other manufactured goods.
Kenya relies heavily on imported wheat from Ukraine and Russia. Almost 75 percent of Kenya’s annual demand of 1.2 million metric tonnes of grain comes from these countries. Wheat shipment of both the countries are done from Black Sea ports, which are directly in the line of disruptions from any likely conflict between them. Disruptions from any military action or sanctions could see bread and wheat flour prices going up. Bread is a breakfast staple in the country, and any price increase will hit the household budget.
Russia is the world’s third-largest oil producer and the geopolitical tension could cause disruption to Moscow’s fuel exports. The price of crude is expected to rise to $150 a barrel, according to JP Morgan, from the current $94.20. The price rise could drive Kenya’s pump prices up, overwhelming the State-backed subsidy that has kept pump prices unchanged at Sh110.60 based on the barrel at $82.03..
It is also feared that the conflict may lead to a sell-off of shares, pulling down a market that is recovering from the COVID 19 damage. The normal trend under such circumstances is investors rushing back to bonds and the safest assets. This could hurt the flow of foreign investors to the Nairobi Securities Exchange (NSE) where the foreigners account for 58 percent of trading at the bourse.
.Moscow faces the threat of sanctions if it invades Ukraine by western powers, which will hamper the use of the dollar trade which can cripple Kenya’s trade with Russia. Russia is the fourth-biggest buyer of Kenyan tea. It imported Kenyan tea worth Sh6.2 billion in the 11 months to November 2021. Kenya, which maintains strong trading and diplomatic ties with the US, Russia and China, will find itself in a tight spot if the Russia-Ukraine tension blows up into a conflict.
