Dn her acceptance speech for the Bernhard Harms Prize, awarded on November 30, 2023 by the Kiel Institute for the World Economy (Germany), the first deputy managing director of the International Monetary Fund, Gita Gopinath, warned against harmful effects of the increasing geoeconomic fragmentation of the planet. Since the start of the war in Ukraine, trade within each of the two politically aligned blocs of countries on this issue (based on votes at the United Nations) has increased by almost 1.5 percentage points more than trade between these blocks.
At a time when geopolitics increasingly shapes the global economy, the consequences of interstate power plays are casting lasting shadows on commodity markets, altering the macroeconomic landscape, and triggering commercial and political fragmentation.
Between 2000 and 2018, geopolitical events (notably the September 11, 2001 attacks in the United States, the “Arab Spring” and missile strikes in Syria) had repercussions on energy markets in 70% of cases . More recently, the share of links between grain supply problems and geopolitical events increased from 10% before 2018 to 30% during the trade war between the United States and China, and more than 50% during the Russo-Ukrainian war (“The Origins of Commodity Price Fluctuations”, Sarah Mouabbi, Evgenia Passari and Adrien Rousset Planat, unpublished working paper, presented at the annual conference of the American Economic Association, January 6).
Text indicators
Even more striking, at the height of the US-China trade war and since the invasion of Ukraine, business news articles attribute global supply disruptions in all commodity categories to geopolitical developments, rates comparable to those dealing with the consequences of the pandemic on the supply chain.
These textual indicators further reveal a complex relationship between geostrategic events and the global economy. On the one hand, geopolitical risk affects the economic cycle, echoing economic losses and opportunities, often through the volatility of commodity markets: these are at the heart of geoeconomic developments, often bearing the cost of the fragmentation of exchanges and targeted sanctions. On the other hand, these markets also accelerate or delay geopolitical decisions. A recent example is the timing of Russia’s invasion of Ukraine, which coincided with high oil prices and tight commodity markets linked to Europe’s economic tensions, giving Russia an advantage strategically significant.
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