This paper begins by discussing the socio-economic and resource pressures facing the international community prior to Russia’s invasion of Ukraine on 24 February 2022 (Chapter 2) before examining the direct impacts of the conflict on the complex and interconnected energy, food and fertilizer markets (Chapter 3).

It then considers the potential for cascading economic, social and security risks around the world (Chapter 4). Finally, it discusses the ways in which policy and market responses witnessed to date – and those that might follow in the coming weeks and months – may mitigate or exacerbate cascading risks from the conflict, and explores the possible ramifications for international cooperation and security in the longer term (Chapter 5).

Key Insights

• Both Russia and Ukraine are important to global resource markets, particularly for energy, food and fertilizers. Economic sanctions, trade restrictions and policy interventions introduced by national and regional governments in response to the invasion have led to a rapid 'spike' in prices for these commodities. This trend has been further exacerbated by disruption to supply chains and fears of potential supply shortfalls.

• Before the conflict, demand in energy, food and fertilizer markets was already running ahead of supplies and driving up prices. Following the COVID-19 pandemic, a global cost-of-living crisis had ensued, characterized by rising levels of energy and food poverty. These conditions will be significantly worsened by the war in Ukraine.

• High prices for energy and food pose immediate threats to human security, particularly among low-income and vulnerable populations in all economies and against a backdrop of post-pandemic inflation and limited fiscal capacity. These threats may also trigger cascading risks, which may combine with existing socio-economic and political stresses to spark unrest and even further conflict in other parts of the world. The potential for coincident price or supply shocks - including as a consequence of climate change - further amplifies the risk.

• Mitigating the most immediate harms to populations at home and abroad may be a top priority for policymakers, but failure to keep long-term objectives in mind - climate change mitigation, in particular - can lead to bad decisions that further embed existing fragilities in economic and social systems.

• The Russia-Ukraine crisis poses new challenges to the international community, but the cascading risks that it is amplifying - supply-chain disruptions, market volatility, resource insecurity, the displacement of people and significant geopolitical change - are already part of a new reality in the face of climate change.

• Governments must invest now to build the long-term resilience of societies and economies against global shocks of the scale that has been witnessed over the past two years, firstly the COVID-19 pandemic and now Russia's war in Ukraine. They should take measures that mitigate both the ongoing impacts of the situation in Ukraine and the longer-term risks of market disruption and geopolitical upheaval ('no-regrets' measures). These might include prioritizing resource-demand reduction and system changes to improve resilience and mitigate market volatility.