The ongoing threat of war between Russia and Ukraine has sent global oil prices soaring and restricted wheat exports prompting Kenyans to brace for higher energy and food costs.
Crude oil prices rose yesterday to the highest level since 2014, to Sh11,380 ($100) a barrel, just after Russian President Vladimir Putin ordered a military operation against Ukraine.
Energy and Petroleum Regulatory Authority (Epra) Director-General Daniel Kiptoo yesterday said that Kenya would feel the impact of the price increase almost immediately.
“If you keep large stocks of fuel when you think the prices are low, then the prices go down (further) you will have a hard time selling that stock,” Kiptoo said.
He said Kenya’s fuel stocks can only last ten 10 days meaning the higher fuel prices will be reflected in the next fuel pricing on March 14, unless the government continues to apply the fuel subsidy to keep the prices low.
Ukraine’s ambassador to Kenya Andrii Pravednyk warned that should the conflict between his country and Russia escalate, Kenya would feel the impact.
He said students who want to study in Ukraine would lose opportunities while those already there could be forced to leave.
According to the envoy, import and export would also experience disruptions, since the capacity of Ukraine’s exporting companies would be affected.
“Exports to Ukraine will also be affected. Economic relations with Kenya are still growing and this year, we generated about $250 million, which was a break-through for Ukraine and an increase form Sh10 billion ($92 million). If we manage to get international support and assistance, we will be in a position to restore trade between Ukraine and Kenyan governments,” he said.
The conflict could also trigger a sell-off of shares, pulling down a market that has fully recovered from the economic damage caused by the Covid-19 pandemic.
A major risk event usually sees investors rushing back to bonds and the safest assets in what could hurt the flow of foreign investors to the Nairobi Securities Exchange (NSE) given the foreigners account for 58 per cent of trading at the bourse.
The Russian invasion of Ukraine risks further fanning oil prices — and therefore inflation through costly transport, electricity and other manufactured goods.
Disruptions from any military action or sanctions could also see bread and wheat flour prices rally in Kenya, which relies on imported wheat from Ukraine and Russia.
Moscow has been threatened with sanctions if it invades Ukraine by western powers, which include being denied the chance to trade using the dollar, crippling its ability to trade with countries such as Kenya.
Russia is the fourth-biggest buyer of Kenyan tea, having taken up produce worth Sh6.2 billion in the 11 months to November 2021.