This war is making the rich richer, then why should it end?

Close-up of soldier in military uniform holding weapon with Ukrainian flag in background | Courtesy: Special arrangement

In the famous Hollywood movie Schindler’s List, made against the backdrop of the Second World War in Germany, the protagonist, Oskar Schindler, a struggling businessman in the best of times, suddenly finds himself in riches and asks himself a question - why is he making money now and never in the past. The penny drops for him when he realises he is making profits due to war. 

Now, it’s no different. If the reports from the ground are any indication, then it could be an unending war where Russia may find it difficult to defeat Ukraine, which is gaining funds and assistance from the West. This is more so as there is little interest in the stakeholders to end the war as everyone is making big money except the commoners everywhere.

The Ukraine war is reordering the world economy in a manner not even conceived at the time when it began six months ago on February 24, 2022. What is easy to say is that it has made oil, gas and food grain exporters unimaginably richer and most of the importers of all the above commodities poorer. What it means is that the countries of West Asia, like Saudi Arabia and UAE, are enjoying windfall profits. Russia is also known to be making a billion dollars a day since the war began, and that does not include the proceeds from food grain, fertilisers and the like. Between April and May this year, India came close to making $5 billion from the export of foodgrains but later realised that its harvest was inadequate to meet its export commitments and hastily stopped it. Despite that, it exported about 3.7 lakh tons of food grains.

In the oil and gas sector, Saudi Arabia, for instance, the world’s second-biggest producer of oil, has seen a severe jump in its revenues. The first quarter showed that its GDP had grown more than the figures in 2020. According to Paul Rivlin of Moshe Dayan Centre of the Middle East and Africa, “Saudi’s revenues from crude oil sales have increased dramatically. In the first quarter of 2021, they came to $39 billion. By the first quarter of 2022, it had risen 92 per cent and reached $75 billion. At this rate, it will reach $300 billion, compared with $119 billion in 2020 and $202 billion in 2021. In the UAE, where oil production declined, revenues rose from about $33 billion in 2020 to $46 billion in 2021”. 

The windfall profits that the Middle East is earning are shaping its foreign policy in a manner that the United States and Europe had least expected. US President Joe Biden’s visit to Riyadh and the way in which the young Saudi prince, Muhammad Bin Salman, refused to succumb to pressures of Washington to substantially increase oil production and also to abandon ties with Russia and China firmly indicated how the countries of the Gulf perceived the United States. It’s a far cry from the time when US President Franklin D Roosevelt met Saudi King Abdul Aziz at USS Quincy at Great Bitter Lake, Egypt, on February 14, 1945. 

As a concession to the US President’s visit to Riyadh, Saudi promised a token bump of 100,000 barrels per day. This amounts to nothing. Prince Mohammed bin Salman and Saudi’s close ally Prince Mohammed bin Zayed, both have not been as critical of the Russian invasion as the US would have expected them to be. The Middle East believes that the US is a declining power and Russia and China are growing rapidly to fill up the vacuum. Besides, China and India - the two Asian powers - rely on petroleum supplies for 50 per cent of their energy needs from the Gulf - largely from the Saudis, Iraq and UAE. China also buys crude oil from sanctioned Iran. A lot will begin to change if the US and Europe sign the Joint Comprehensive Plan of Action (JCPOA) deal that will immediately allow a million barrels of additional oil into the market. More about it later.

When the Ukrainian crisis hit the world, it introduced many imponderables, from how the sanctioned Russian oil and gas would be replaced to what the world would do to augment food supplies once the war between Russia and Ukraine disrupts them. The bulk of the food supplies to many Arab countries like Egypt, Morocco, and Yemen came from the Black sea. They were all on the threshold of a calamitous food crisis till Turkey brokered a deal with Ukraine and Russia. Now ships are going through The Bosphorus Strait to access the silos of wheat, corn and fertilisers belonging to these warring countries. 

One of the reasons why this deal was brokered is because of the excessive lobbying by large cartels that have bought tens of thousands of hectares of farmland to grow food grain in Ukraine. In fact, a majority of the fertile farmland of beleaguered Ukraine is now under the control of US-based multinational agriculture companies. The worry, as stated above, is that once the deal is done, there is no one really worrying about the war, which may just carry on helping the weapon manufacturers, oil and gas exporters and food grain exporters.

Another entity that has done well is the Indian refiners like the Ambanis, who own the Jamnagar refinery, and Rosneft, which controls the Nayyara refinery. Both these refineries are cleaning up the crude Urals they receive from Russia, which is heavier and needs other crude to stabilise. Employees in these companies think they have never made as much money as they are making now. They all feel like Oskar Schindler.

The only people that worry, besides the hungry people of Africa and Asia, are the Europeans that fear that there will not be any gas to warm their apartments come winter. 

(This article is based on the lecture this writer gave at the Centre for West Asian Studies, JNU, New Delhi titled - Ukraine, Oil and West Asia)

Sanjay Kapoor is a Senior Journalist based out of Delhi. He is a foreign policy specialist focused on India, its neighbourhood and West Asia. He is the Founder and Editor of Hardnews Magazine and he is also the General Secretary of Editors Guild of India.