Expert: Russia-Ukraine War exacerbates the Global North-South divide

During the webinar, Professor Wong enumerated several aspects of how the war aggravates the global economic divide.

According to him, the increasing commodity and energy prices brought about by the war has impacted global food and energy security. In a study conducted by the UN Food and Agriculture Organization in 2022, they found that the prices of food have reached a “new historical high”, aggravating the already all-time high food commodity prices brought about by the global disruption of the pandemic and easing of economies. This is further compounded by the multiple sanctions on Russia who, along with Ukraine, are prominent players in the export of food and agricultural products. The global energy market was also hit by the effects of the war since Russia’s natural gas industry supplies much of Europe’s energy requirements. This resulted in the European energy crisis fueled by Russia’s 60% reduction on gas exports and EU’s cut on gas demands to the country.

The war also widened the global wealth inequality and pollution rate gaps among the richest and the poor. According to Oxfam International, the richest 1% of the world has grabbed twice as much wealth as the rest of the world put together for the past two years. The global wealth gap increased further, with the poor being driven deep into poverty due to the soaring inflation outpacing workers’ wages while the rich continued to profit from the rise of food and energy demands, as well as the emergence of new industries influenced by the digitalization of the world. As a result of this inequality, pollution gaps also grew wider. Oxfam’s research showed that the investments of just 125 billionaires already emits 393 million tonnes of CO2 each year while emissions from their lifestyles are thousands of times higher than an average person.

Financial regionalization and de-dollarization is also a rising trend among countries. While de-dollarization has been on the radar for years now, the weaponization of the U.S dollars through freezing U.S dollar assets as sanctions - more recently in the case of Russia in 2022, have motivated the diversification of foreign central banks. During the 2023 World Economic Forum in Davos, UAE has opened itself to oil trade settlements in non-dollar currencies. This undermines the long-standing petrodollar trade in exchange for China’s yuan, India’s rupees, and other local currencies to lower transaction costs. China’s rising economic growth also made it attractive for BRICS nations - Brazil, Russia, India, China, and South Africa, to either accept or strongly consider yuan for trade. De-dollarization is also responsible for the increase in non-SWIFT payment systems like China’s Cross-Border Interbank Payment Systems (CIPS), fintech alternatives like AliPay and WeChat Pay, and Central Bank Digital Currencies (CBDC). Central banks have also looked into increasing gold reserves to stabilize their currencies amidst geopolitical worries and the rising interest rate and inflation pressures.

Professor Wong believed that this economic shift is owed to the growing de-westernization and regionalization of the world order. Countries have looked into the war as a mere geopolitical tussle between the West and Russia, more specifically with the U.S-led NATO. The war’s economic, food, energy, and national security impact on the Global South have pushed Global South-South cooperation and regionalism to reduce dependency on the West and other great powers. This puts forward a multipolar world order with a multi-centered economic and financial system.

He also added that this multipolarity also influenced the development of a new version of the nonaligned movement (NAM) in the Global South where actors are not only maintaining neutrality but also have the agency to achieve greater economic security and political autonomy that is not driven by the Global North and its major powers. Global South now is no longer defined to be the “third world” or the “underdog”, rather the emerging powers who have active participation in determining their country’s position in the geo-political-economical dynamics.

While the war exacerbated the divide between the Global North and Global South, it presented a new opportunity for a multipolar world order of cooperation and consensus. Economic decline, climate change, and war - like what the world is seeing now, could potentially challenge the notion of hegemony and allow other countries to grow and rise as regional leaders.