How Russia-Ukraine war will affect you

Dar es Salaam. Russia and Ukraine are indeed thousands of miles away from Tanzania; but the impact of a military conflict between the two countries would have a profound impact on the cost of living of Tanzanians.

From fuel to wheat flour costs, Tanzanian consumers should expect no mercy from traders as prices are likely to rise due to a possible disruption in supply as western powers ponder a new wave of sanctions on Russia after the country invaded Ukraine on Wednesday.

And, as goes a poignant African adage: ‘When elephants fight, it’s the grass under their feet that suffers.’ Tanzanians must be helplessly looking on at the developments in Russia and Ukraine, with world oil prices topping $100 for the first time in more than seven years.

This was due to supply fears after Russian President Vladimir Putin launched a full-scale invasion of Ukraine, killing dozens and forcing hundreds to flee for their lives in the pro-Western neighbour.

Though Tanzania imports refined petroleum products from various sources under the Bulk Procurement System (BPS), a disruption in supply will definitely affect local prices in the coming few months, thus sending costs of transport and some manufactured products up.

European benchmark Brent North Sea crude surged more than eight percent to $105.79 per barrel - the highest level since 2014. US contract West Texas Intermediate reached $100.54 per barrel, also a peak last seen more than seven years ago.

AFP reported yesterday that Russian air strikes hit military facilities across Ukraine and ground forces moved in from the north, south and east, triggering condemnation from Western leaders and warnings of massive sanctions.

Analysts say Tanzanians will see the actual impact of this rise in fuel prices in April. “It’s unfortunate that this comes at a time when a tender to pick a company that will supply fuel in Tanzania under the Bulk Procurement System has just been issued. The impact of this rise in global fuel prices will be felt locally in April,” said the executive director for Tanzania Association of Oil Marketing Companies (Taomac), Mr Raphael Mgaya.

Russia is one of the major oil exporters in the world.

Mr Mgaya’s worry is based on the fact that the war comes at a time when demand for oil and gas was already picking up after major global economies resumed production after the lifting of Covid-19 lockdowns.

“In fact, it is just about two days ago when the UK [through British Prime Minister Boris Johnson] said it was time to live with the coronavirus, suggesting that fuel demand will rise further,” he said.

With foreign investors accounting for the lion’s share of trading activities at the Dar es Salaam Stock Exchange (DSE), the war could also prompt a sell-off of equities.

A capital markets manager from Vertex International Securities Ltd, Mr Ahmed Nganya, said though it may take time for the impact of the war to show on the local stock market, it would eventually affect the participation of the foreign investors.

“As time goes on, the impact of the conflict will be vividly seen in different major stock markets across the globe and as most of foreign investors who participate at the DSE also have links to those markets, they might limit their exposure for any uncertainty,” he said.

Since the conflict would also affect prices for world traded commodities such as fuel, some listed companies would experience rising production and operational costs.

AFP reported yesterday that Asian and European stock markets nose-dived - with Frankfurt shedding five percent in mid-afternoon trading - as investors fled risky equities, while haven investment, gold, rose to just over $1,955 per ounce.

Though millers may have several options to look up to, the war could also potentially disrupt the supply of wheat, with both Russia and Ukraine being major sources of the product. Available data show that in 2019, Tanzania imported goods valued at $131 million from Russia but out of the amount, wheat alone accounted for $105 million.

“It is too early to speculate because apart from Russia, millers also get their wheat from a number of other sources,” said the Confederation of Tanzania Industries (CTI) trade policy specialist Frank Dafa. Russia is also one of the major markets for Tanzania’s raw tobacco, coffee and sowing seeds among others.

Tanzanians who live in Ukraine said yesterday that the situation was tense.

A student, Ms Neema Fadhili, and businessman, David Msuya, said the situation was tense, with queues in ATMs and supermarkets.

“I live in Kharkiv City which is close to the border. There are huge queues at ATMs and supermarket. Our bank cards are currently temporarily closed so we cannot to withdraw money…classroom sessions have been postponed. We have been issued with safety guidelines on how to live under the existing environment,” said Ms Fadhili.

And Mr Msuya said: “The situation is worrying. Bombs, being dropped by Russian soldiers, could be heard sporadically. The government has told us to remain calm but the situation has been difficult because airports are closed, shops are closed and there are huge queues at ATMs”.

Until press time yesterday, AFP reports showed that US President Joe Biden virtually met with G7 allies to hammer out a raft of new sanctions against Russia.

The virtual, closed-door meeting of G7 leaders - Britain, Canada, France, Germany, Italy, Japan and the US - started at 9:17am, a White House official said. “President Biden and leaders are discussing their joint response to President Putin’s unprovoked and unjustified attack on Ukraine,” the official said.

Before the G7 gathering, Biden first huddled with his National Security Council in the Situation Room, the White House said. His speech to the nation was scheduled for 12:30 pm (1730 GMT).

Additional reporting by Josephine Christopher, Alex Malanga and Gadiosa Lamtey. See more stories on Page 15