A de-globalised future as countries begin onshoring

It's a complex question and the situation is still developing. Most analysts are saying that this war will squander the post-Cold War peace dividend. After the fall of the Berlin Wall, global geopolitics gradually moved from a bipolar political order to a more unipolar one. But with this war, we might observe a shift towards the bipolar political order once again.

Since the Cold War, we had not observed an instance of such a large-scale invasion of one European country by another. It appears that this conflict may determine the political order in the coming decades.

In terms of the sanctions, they will have severe economic consequences. Already $630 billion Russian reserves have been frozen, which constitute about 50% of the total Russian reserves. Although the SWIFT sanctions remain confined to a selective set of banks, it appears that harsher sanctions are coming.

Countries may have to think hard about the diversification of sourcing. For instance, automakers, computer makers to all large automated industries require chips. Making chips requires neon gas as well as a metal called palladium. 90% of all neon gas supplied in the US comes from Ukraine. Russia represents nearly 40% of global palladium production. Russia is also the largest global supplier of wheat, and, together with Ukraine, controls one-fourth of the global supply.

Before the invasion of Ukraine, countries were not necessarily concerned about the source of their raw materials and offshoring was a common practice. But now, the world is going to get sort of deglobalised as countries begin onshoring, i.e., procuring their imports of inputs and outputs regionally. The post-war global economy may become more decoupled and more protectionist.

Zaidi Sattar is the chairman of Policy Research Institute