Putin’ Commodities out of supply: Impact of the Russian-Ukraine war on the US economy

By: Digvijay Chakrabarti
Kriti Bhasin

This article from our research challenge appeared in Supply Chain Brain.

Every day brings new coverage of different aspects of the Russian invasion of Ukraine. A common refrain through this coverage is America’s involvement in- or more specifically, impact on – the war, whether in the form of deployment of troops for NATO territory, announcement of security assistance to Ukraine, or imposition of sanctions on Russia.

Less prominent, however, is any clear perspective or story highlighting the war’s impact on America.    

As the graphic images of the war in Ukraine continue to show the immense loss of life and property, another crisis has arisen from the effects of this conflict—a global resource shortage that threatens America’s economy on multiple fronts.

Supply chains have been disrupted at source, in transit, and at destinations (see Fig. 1). Leakages have also arisen due to resources being sucked into the war.

Fig. 1 – Causes behind the Supply Chain Disruptions

In this piece, we explore the possibility of measuring the impact of these supply chain disruptions on the US economy.

Since similar crises or geopolitical conflicts may arise in the future, another question we briefly examine is the possibility of determining who might be at greatest – or least – advantage in case of a supply chain disruption.

Measuring the impact of the war on the US economy

Quantifying the impact on supply chains and the economy is challenging due to several reasons:

  • Intricate and interconnected supply chains 
  • A large number of interdependent and irrational actors at the trans-national level influencing supply, distribution, and demand. 
  • Alack of objective high level KPIs to help quantify such an impact for any stakeholder, whether corporate or national

To quantify the impact of supply chain disruptions, it is essential to first ascertain which commodities will be in short supply for US industries.

American businesses depend on Russia and Ukraine for a plethora of commodities. High dependence of the USA on Ukraine and Russia (Figure 2a) as well as low alternatives available globally (Figure 2b) implies that three commodities- neon gas, palladium and pig iron, are critical commodities which will be in short supply for the US.

Fig. 2a – Commodities where the US is highly dependent on Russia and Ukraine [1]

Figure 2b – Contribution of Ukraine and Russia to the global supply of these commodities [2]

The next step in quantifying the impact is to understand which US industries would be the most affected by this shortage.

Direct impact:

While these commodities seem relatively niche, our analysis revealed that their shortage would have a direct impact on ~12% of the US economy. The analysis was based on:

  1. A subjective analysis of the industries dependent on the three determined critical commodities 
  2. The contribution of these commodities to the US GDP. (Reference to Annexure) 

Manufacturing, electronics, and automobiles industries are identified as industries of direct impact. To account for the subsequent forward and backward multiplier impact, further dependencies of these industries are captured in Figure 3.

Fig. 3 – Downstream impacts across various industries [3]

Indirect impact:

Ukraine and Russia are key suppliers of several commodities that have become scarce due to the war. The shortage of these commodities has led to substantial price increases (Fig 4). How does this price change trend play out over time? Comparing price change percentages until June and  August of 2022 demonstrates percentages have decreased for most commodities. A reasonable explanation for this phenomenon could be the immediate shock and panic of the initial months post invasion has neutralized over time.



Fig. 4 – Correlation between price rises and combined global supply dependence on Ukraine and Russia [4] (where price change has been calculated post-war for June as well as July/August 2022)

This analysis has the potential to be utilized to predict profitability of going short or long on a commodity.

Exploring the possibility of developing a framework to predict the impact of future supply chain disruptions

To move to the secondary question and perhaps, the bigger picture – we examine the possibility of using the same methodology to predict the outcome of any supply chain disruption globally. The analysis undertaken does require us to examine some prerequisite conditions for a similar study. To use the same methodology, we would need to study the commodities with concentrated supply and supply chains with bottlenecks.

We looked at the example of palm oil in Indonesia. Understanding the supply chain itself was a key component of understanding the supply chain disruption. The key findings were:

  1. Palm oil is a commodity whose supply is densely concentrated in Indonesia and Malaysia
  2. Since the area is disaster/earthquake-prone, the supply chain becomes vulnerable to disruptions

This addressed the prerequisite part and allowed the determination of countries that would be impacted from this hypothetical disruption (as shown in annexure C). The next steps for such an analysis would be to connect the dots and figure out which industries would be impacted.

This implies that a framework can be crafted which predicts the winning and losing stakeholders in case of any supply chain disruption globally. 


War, put simply, is a drain – be it of human life, natural assets, or financial resources. In the absence of avoiding war completely – a noble if largely aspirational pursuit – the next step available is mitigation of its effects. And that starts with facing the truth – measuring the drain. 

With this in mind, we attempted to analyze the impact of Russia’s invasion of Ukraine on the US economy. Our analysis led us to the conclusion that the invasion has had an adverse effect on ~12% of the US economy.  

The impact, though seemingly small, is significant. It is thus worthwhile to develop a mechanism that would help stakeholders identify their vulnerabilities and plan mitigation strategies in due time. The case study of palm oil in Indonesia demonstrates applicability of this methodology in another context, laying the foundation for developing a larger and more comprehensive tool: a global framework to quickly predict the impacts of supply chain disruptions on a country’s economy. Turbulent times will show themselves from one generation to the next. An economy’s best bet to survive such moments of turbulence is being proactive.


Annexure A:

To find critical commodities, we first undertook an extensive literature survey to determine commodities where Russia and Ukraine are key suppliers (>5% of the global supply). Next, we calculated the dependence of the US on imports from these two countries contrasted with their own domestic capabilities. We analyzed 14 commodities across 20+ US industries to chart a commodity-level-matrix of dependence of the US v/s global replaceability of Russia and Ukraine as supply hubs. This led us to conclude neon gas, palladium and pig iron are the most critical commodities.


Annexure B


Annexure C

Palm oil is a key ingredient required across industries such as cosmetics, FMCG, as well as food and beverages, critical to both individuals and corporations. This is true for hundreds of commodities. But a global duopoly, a highly congested bottleneck, and the presence of two very active volcanoes makes the palm oil supply chain a recipe for a global meltdown.


Fig. 6 – Key exporters of palm oil

Fig. 7 – The supply chain of palm oil in Indonesia

Indonesia lies on the Philippine plate of the Pacific Ring of Fire, making it a hotspot for geographic risk. Roughly 90% of all earthquakes and 75% of all active volcanoes on Earth occur along the Ring of Fire, and the ring is dotted with 75% of all active volcanoes on Earth.

The combined projected impact of this risk is estimated to be around $12.5B (2 major ports account for almost 70% of Indonesia’s supply capabilities).

 Who will be affected by this?

The top 4 importers of palm oil from Indonesia are India, China, Pakistan, and Spain. All these countries are reliant on Indonesia for over two-thirds of their net import of palm oil.

Fig. 8 – What % of palm oil imports of these countries come from Indonesia


Annexure D

Palm Oil Supply: Link

India’s Palm Oil Imports: Link

China’s Palm Oil Imports: Link

Pakistan’s Palm Oil Imports: Link

Spain’s Palm Oil Imports: Link

Indonesia’s Industry: Link

Ring of Fire: Link

Historic volcanic activities: Link

Major ports in Indonesia: Link

Foot Notes

[1] FischerJordan analysis based on data from The Observatory of Economic Complexity

[2] FischerJordan analysis based on data from The Observatory of Economic Complexity

[3] Deeper the shade, greater the degree of impact

[4] Combined Global Dependence = Percentage of global supply coming from Russia and Ukraine

[5] Conservatively, the upstream and downstream impact would at least have 1x factor, giving us the net multiplier of 2x

[6] Since all industries are dependent on Neon – the commodity with maximum dependence, the percentage has been chosen accordingly


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