Grandstand. The invasion of Ukraine and the economic sanctions against Russia have significant consequences on the prices of minerals, energy and agricultural products. Since the beginning of 2022, the CRB index (for Commodity Research Bureau), composed of 19 commodities, has increased by around 30%; the FAO index, which tracks the price of basic foodstuffs, increased by 18%; the price of a barrel of oil has gone well beyond 100 dollars [92 euros] ; gold, a safe haven, is experiencing historically high prices, with an increase of 10%… The first demonstrations against the rise in the prices of basic foodstuffs and the cost of living have taken place, particularly in Africa.
Recent history shows how sensitive populations are to these increases. The explosion in the price of basic foodstuffs in 2007 and 2008 was one of the triggers for these food riots. Similarly, the sharp rise in prices that we are currently experiencing will have strong and lasting consequences for many countries. Those most affected will be the poorest and most unequal, for whom there is fear of a resurgence and intensification of social movements and armed violence, leading to greater political instability.
Wealth effect
In many countries, especially in Africa, agricultural goods account for a very large share of production and consumption. The current rise in prices will certainly increase the income of producers, but above all will seriously penalize the real income of non-producer individuals. However, the lower the income of individuals, the lower the “opportunity cost” (i.e. the loss of income and well-being) of joining an armed group, the ability of these groups to recruit combatants (“ External Shocks, Internal Shots: the Geography of Civil Conflicts », Nicolas Berman and Mathieu Couttenier, The Review of Economics and Statistics No. 97, 2015).
In regions that are non-producing or highly dependent on imports of agricultural goods, the fall in real income raises fears of an intensification of armed violence. In producing regions, in the absence of redistribution mechanisms, the effects of the price increase are more ambiguous. This increase will certainly increase the opportunity cost of producers, but this wealth effect will fuel greed and increase land-related conflicts. The latter will be all the more present as the inequalities between communities and individuals increase.
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