Albania's economy will suffer direct and indirect shocks from Russia's attacks on Ukraine. Fuel and flour prices are expected to rise, as the country imports from Russia 47% of its annual grain needs and 12% of oil. The indirect consequences will come from the overall rise in food and energy prices and the negative impacts on tourism. The wholesalers claim that there are reserves of oil for three months and wheat, for 45 days, but claim that the new supplies will be at higher prices. Three scenarios of the impact of war on the global economy.

When Russia's attacks on Ukraine began at dawn on Thursday, February 24, beyond security, states around the world began to calculate the economic costs of the war. Global markets that had just begun the fragile recovery after the pandemic fell into stress. Commodity prices, especially oil and grain, rose immediately by 5-8% overnight.

As history has shown, crises do not affect all countries equally. In times of war, supply chains are damaged, so states with large supply reserves suffer less, as often even monetary power is not enough if goods are lacking.

If the war continues and so do the sanctions, Albania will be affected by its supply of the country's main commodities, bread and oil. The next confrontation will be with the inability to curb the price increase that the war will bring about for all import items as a whole.

It will affect our country directly, due to the dependence of oil and wheat supplies from Russia and indirectly, with rising commodity prices, as Ukraine is a major global exporter of raw materials for the food industry (cereals, sunflower oil, etc.). ).

Albania provides 47% of the annual wheat needs from the Russian market and 3.3% from Ukraine, according to INSTAT. The President of the Association of Flour Processors, Adi Haxhiymeri, said that the wheat reserves in our country are enough for 45 days. He ruled out the possibility of being left without supply, but said the price of cereals would rise further.

Luigj Aliaj, from the Association of Hydrocarbon Companies, stated that fuel reserves are enough for three months, but added that the situation in supplies and prices will evolve depending on the situation.

Russia's economic isolation from Western sanctions will block the 11th largest economy in the world, the weakening of which will make it difficult to supply the world with raw materials, especially oil.

In the worst-case scenario, which means a total cut-off of gas from Russia, Europe's economy would shrink by 3%, according to an analysis made for this purpose by the US news agency "Bloomberg". The war will also affect the tourism sector in Albania, as Ukrainians accounted for 22% of charter movements to Albania.

During 2021, Albania realized 2.7% of foreign trade with the conflict areas, Russia and Ukraine. Albania's trade volume reached ALL 701 billion, while with Russia and Ukraine, trade in value was ALL 19 billion, or 2.7% of the total.

The trade volume is dominated by imports of goods from these two countries. In 2021, Albania imported from Russia and Ukraine ALL 19 billion of goods, which constitutes 99.5% of the trade volume and the rest, 0.5%, is represented by Albanian exports to these countries, mainly agricultural products.

Despite the fact that the trade volume in these countries is low, Albania is highly dependent on the import of vital materials, such as cereals and oil from Russia. From these countries we import 50% of the annual quantities of cereals and 12% of oil.

But the indirect dependence on the Ukrainian and Russian markets is higher. Ukraine is the largest producer and exporter of cereals and sunflower oil in the world, which Albanian wholesalers buy processed from other countries, mainly Italy.

50% of cereals from Russia and Ukraine, domestic reserves are enough for 45 days

The attacks in Ukraine were the darkest day for grain importers, who have linked their business directly to Russian supplies. Adi Haxhiymeri, one of the leading importers of wheat, said the conflict between the world's leading grain producers, Russia and Ukraine, would put supplies across the world in difficulty.

Data from customs show that in 2021 a total of 326 thousand tons of cereals were imported, 50% of which were supplies from areas in conflict. Albania imported 47% of cereals from Russia in 2021, 36% from Serbia, 4% from France and 3% from Ukraine. Cereal import sources are dominated by Russia, Ukraine and Serbia at 86% of the total consumption need.

The wholesalers claim that the reserves are not large, as a part of them were depleted due to the pandemic, while in the last two years there have been problems in supplies from the decline in production.

Adi Haxhiymeri said the war in Ukraine came at a time of multiple crises, created by declining wheat production and high energy prices. He said wholesalers have enough reserves in warehouses to afford 1.5 months of imports, but meanwhile the government has no grain reserves, as other states have in these situations.

According to Mr. Haxhiymeri, the wholesalers are trying to find new sources of supply from France, Argentina, Romania, etc. The possibility of not having supplies, according to him, is very low, but the price of new imports will be higher. Meanwhile, at the moment, importers need large liquidities in order to change supply sources and cope with high prices.

Bread market players claim that if the conflict lasts and sanctions do too, it will no longer be about prices but about the existence of the product. Russia is the world's largest supplier of grain and, together with Ukraine, accounts for almost a quarter of total global exports. In countries like Egypt and Turkey, Russian cereals meet 70% of domestic needs.

12% of oil in Albania, from Russia

Russia is one of the world's largest suppliers of grain, gas and oil. In 2021, our country imported 12% of oil quantities from Russia. Even oil imported from Italy originates from Russia, but is simply processed in its refineries. In 2021, imports of fuels and minerals (oil, gas) amounted to about 1 million tons, but almost 70% of the quantity is dominated by oil.

Importers are now not calculating the price, but are concerned about security of supply. Luigj Aliaj, from the Hydrocarbons Association, stated that the security reserves are sufficient for 3 months, and added that further supplies will depend on the course of the war. Before March 15, according to him, the price in international markets may exceed 135 USD per barrel and consequently, the increases will be reflected in domestic markets.

Albania, recently, destroyed the only oil refinery in the country, which with all the problems it had could amortize to some extent the acute situation from lack of supplies. Domestically produced and refined oil, according to earlier estimates, met almost 30% of the needs of the domestic market.

The refinery is currently in the process of being dismantled for scrap, while the oil extracted from the country's underground is being sold crude in foreign markets.

Currently, a liter of oil in the country has reached the level of 192-194 ALL, but with the latest developments, prices will fly to 250 ALL very soon.

Negative effects on tourism

Last year, the share of Ukrainian tourists in domestic tourism had increased. According to data from TIA, last year, in July-August flew to Rinas and vice versa, 38.5 thousand passengers from Ukraine, or 65% more than the same period before the pandemic. Tourists from Ukraine accounted for 22% of charter traffic and were the second largest group after Poles.

Albania was expected to be an important destination for tourists from Russia and Ukraine in 2022. Ukrainians for several years have discovered on Albanian soil, with very attractive tourist offers, among which the undiscovered Albanian nature was the strongest point.

Besnik Vathi, head of the ATHS travel agency, with long experience in the market, tells Monitor that this war is thought to have catastrophic consequences, in all the tourist markets where Ukrainians make up the majority.

Rrahman Kasa, from the Albanian Tourist Union, says that, due to the escalation of the Russia-Ukraine conflict, the negative effect does not lie only in the cancellation of bookings, but in the scheme of how they work.

"International partners have some guarantee contracts by prepaying 20-40% of the tourist offer, I think this is the main problem. They are worried about their money, the continuation of customer relations, as well as the partnership relationship between accommodation structures, partner agencies, etc.

Bookings are canceled there and can have a chain effect, as they may demand the money back and the tourist facilities in the country would be put in trouble. This has happened in crisis situations, it has been shown by the case of the earthquake or even the pandemic situation "- concludes Mr. Kasa.

Commodity prices will rise

For Russia, Ukraine is known as an industrial base, producing everything from cars, ships, helicopters, armaments, to nuclear power plant plants, while for Europe, Ukraine is the main supplier of the food basket.

The country under occupation is one of the ten world leading producers of some crops such as wheat and corn. Ukraine is the world's largest producer of sunflower oil, a major global producer of cereals and sugar, and a global player in the meat and dairy markets.

It is also one of the largest producers of walnut conflict will bring difficulties in European markets, or at best, will increase the price of basic items of the basket, as Europe will try to find new sources of supply on the continents more remote and this will increase the cost.

They will be reflected in Albania as well, since our country is a net importer of food.

(Source: Monitor)