Business

Russia-Ukraine conflict: Economic implications for Sri Lanka

Published

4 years ago

2022/03/1

By Asanka Wijesinghe

The Russian invasion of Ukraine deepens the existing global economic woes – persistent supply chain bottlenecks and associated rising inflation – clouding the prospects of a smooth global economic recovery from the pandemic. The West, led by the US and the EU, swiftly imposed strict economic sanctions, targetting Russian banks, oligarchs, political leaders, and state-owned and private entities, generating additional uncertainty over the global economic outlook. The initial disunity in the West on cutting off Russia from SWIFT-a global financial telecommunication system that allows the smooth and rapid cross-border transaction of money- was resolved over the weekend. Such a move will inevitably make payments for Russian exports and imports hard. The ongoing military conflict in Europe could not have come at a worse time for Sri Lanka given its own prevailing high inflation, rising energy costs, and scarcity of foreign exchange. Against this backdrop, this article discusses the economic impact of the European conflict on Sri Lanka, the sectors that will be hit hard, and ways to mitigate the negative impact.

Global Economic Impact

Immediately after the Russian invasion on 24 February, commodity markets rallied up. The Brent spot price of a crude oil barrel reached USD 105 for the first time after 2014. Similarly, the cost of wheat futures for March 2022 in the Chicago Board of Trade (CBOT) exchange peaked, at its highest since mid-2008 (Figure 1). The Russian Federation and Ukraine-known as Europe’s breadbasket- are major cereal, fertiliser, critical minerals, and iron and steel exporters. Meanwhile, the Western powers were busy over the weekend in negotiations to tighten sanctions on Russia.

While the fate of Ukraine hangs in the balance, the consensus among analysts is that the Ukrainians were mounting a fierce and unexpected resistance, effectively increasing the costs for Russia. The US, EU and their allies are contributing to the military conflict by providing financial and military assistance to Ukraine while imposing sanctions on Russia to make dollar transactions difficult. Thus, the severity of the global economic impact will be determined by the scope and duration of the conflict and the effectiveness of Western sanctions.

Western countries will be keen to minimise the spillover effects of sanctions on their economies. Like Germany, the major European economies heavily depend on Russian energy, making it necessary to exempt the energy sector from sanctions. Indeed, the sanctions package unveiled by the Biden administration did not target the energy sector. As long as payments for energy-related transactions go through non-sanctioned and non-US financial institutions, an unconstrained flow of money is guaranteed. Thus, oil prices dropped with futures closing below USD 93 a barrel in New York. However, that optimism was largely fading in early trade on 28 February. The Brent price rallied over 100 dollars again while wheat, soybean, and corn futures were up. Cutting off Russia from SWIFT and imposing sanctions on the Russian Central Bank can deal a severe blow to the Russian economy in the long run. The collapsing ruble can be a harbinger of Russia’s economic collapse. A possible economic fallout will reduce Russian demand for foreign products, and if Russia cuts off natural gas to the European market, a likely outcome will be a recession.

Implications for Sri Lanka

Overall, Russia and Ukraine account for 2% of Sri Lanka’s imports and 2.2% of exports in 2020. However, both countries are vital import sources for wheat and export destinations for Sri Lanka’s black tea (Figure 2 and 3). Russia and Ukraine purchase about 18% of fermented black tea (>3kg) exported by Sri Lanka. Similarly, 45% of Sri Lanka’s wheat imports are sourced from Russia and Ukraine. In addition, more than half of Sri Lanka’s imported soybeans, sunflower oil and seeds, and peas are from Ukraine. Moreover, Russia and Ukraine are significant import sources for asbestos, semi-finished products of iron and steel, copper (cathodes), and potassium chloride for fertiliser.

Unless the Ukraine crisis is not solved immediately, the fuel and commodity prices can rally further. The inflationary pressure in the Western markets, especially in Europe due to high energy prices and supply chain bottlenecks, may reduce consumers purchasing power, lowering the demand for goods exported by Sri Lanka. Europe is a significant export destination for readymade garments, tea and spices, and seafood.

There is also a growing tendency for increased military expenditure in the long run, which might reduce the “peace dividends” for European households. For example, the German Chancellor committed 2% of GDP for defence expenditure, addressing an extraordinary session of Bundestag. Replacing consumerism with militarism will adversely affect countries like Sri Lanka that depend on the European export market. In addition, a prolonged crisis may impede Sri Lanka’s ability to purchase necessary raw materials like fertiliser. Importantly, Sri Lanka’s exposure to the situation is mainly through linkages to the commodity and European export markets rather than direct exposure to the two countries involved in the conflict.

Mitigation

Sri Lanka should focus on safeguarding access to vital raw materials and food commodities. Globally, responding to the crisis, countries are stockpiling grain and exploring alternative ways to do business with Russia in purchasing raw materials. Sri Lanka has limited options to mitigate the impact on already deteriorating food security conditions and access to raw materials. As wheat and rice are substitutes, high wheat prices may increase the demand for rice.

Thus, it is necessary to remove input shortages like fertiliser to ensure domestic production is adequate. Due to the current foreign exchange crisis, Sri Lanka’s ability to effectively face such shocks is constrained. Thus, the urgent priority is to resolve the current foreign exchange crisis to regain the ability to trade swiftly. Achieving debt sustainability and securing dollar inflows from multilateral institutes might be the options at Sri Lanka’s disposal. Then, entering forward contracts for raw materials and fuel and negotiations with friendly countries for food on predetermined prices are possibilities.

Link to Talking Economics blog:

Russia-Ukraine Conflict: Economic Implications for Sri Lanka

Asanka Wijesinghe is a Research Fellow at IPS with research interests in macroeconomic policy, international trade, labour and health economics. He holds a BSc in Agricultural Technology and Management from the University of Peradeniya, an MS in Agribusiness and Applied Economics from North Dakota State University, and an MS and PhD in Agricultural, Environmental and Development Economics from The Ohio State University. (Talk with Asanka – asanka@ips.lk)

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Business

SLAF, Aviyana Ceylon partner to elevate high-end sports tourism with Eagles’ Monsoon Cup 2026

Published

5 hours ago

2025/12/30

Sahan Weerasooriya

-Sports tourism gets a boost: dignitaries at the sponsorship-formalizing ceremony

Aviyana Ceylon, Sri Lanka’s upcoming ultra-luxury seven-star hospitality project, has stepped decisively into the country’s high-end sports tourism space by coming on board as the principal sponsor of the prestigious Eagles’ Monsoon Cup Golf Tournament 2026, in partnership with the Sri Lanka Air Force (SLAF).

The international-standard golf tournament is scheduled to be held on January 11, 2026, and is expected to attract diplomats, corporate leaders, high-net-worth individuals and overseas golfers, reinforcing Sri Lanka’s positioning as an emerging premium leisure and sporting destination.

Under the patronage of Aviyana Ceylon chairman, Dr. Thisara Hewawasam, the company has committed a Rs. 2.5 million sponsorship, marking one of the most significant private-sector investments in elite golf events in recent years.

The sponsorship was formalised at a ceremonial cheque handover held at the Sri Lanka Air Force Headquarters, where Dr. Hewawasam officially handed over the cheque to Commander of the Air Force, Air Marshal Bandu Edirisinghe.

“Our decision to support the Eagles’ Monsoon Cup goes beyond sport. It is a strategic investment in positioning Sri Lanka as a global luxury tourism and lifestyle destination, Dr. Hewawasam said.

“International sporting events with strong networking potential play a critical role in shaping perceptions, attracting premium travelers and enhancing the country’s brand equity. Aviyana Ceylon is committed to supporting platforms that elevate Sri Lanka’s global standing, he added.

Senior SLAF officials, including chairman, Eagles’ Golf Links, Air Commodore Erandika Gunawardhana, secretary of the Air Force Sports Council and Director Media, Group Captain Eranda Geeganage, Secretary of Eagles’ Golf Links, Group Captain Asanka Ratnayake and SLAF Golf Secretary, Wing Commander R.A.S.T.A. Fernando, along with Aviyana Ceylon representatives and invited guests were present at the event.

Air Marshal Bandu Edirisinghe welcomed the partnership, noting that collaboration between the military and private sector is vital in developing sports diplomacy and tourism-led economic activity.

“Eagles’ Monsoon Cup has evolved into a premier sporting event that brings together global and local stakeholders. The support extended by Aviyana Ceylon strengthens our ability to host events of international calibre and contributes meaningfully to sports tourism and national image-building, the Air Force Commander said.

Beyond the golf tournament, the partnership opens the door to new experiential tourism initiatives, including a proposed collaboration to offer luxury helicopter tours for Aviyana Ceylon’s clientele, operated in coordination with the Sri Lanka Air Force.

According to Dr. Hewawasam, the concept aims to provide discerning travelers with exclusive aerial experiences showcasing Sri Lanka’s landscapes, coastlines and heritage.

“Luxury heli-tours represent a new dimension in experiential tourism. They allow us to present Sri Lanka’s natural beauty from a unique vantage point, appealing to high-value travelers seeking privacy, exclusivity and unforgettable experiences, he said.

Industry observers note that such initiatives align with global trends where luxury hospitality brands integrate sports, aviation and curated experiences to differentiate destinations and increase average tourist spend.

The Eagles’ Monsoon Cup is widely regarded as one of Sri Lanka’s most elite sporting events, functioning not only as a golf tournament but also as a high-level networking platform linking diplomacy, business and leisure.

By Ifham Nizam

Business

‘Tea industry largely spared cyclone damage’

Published

5 hours ago

2025/12/30

Sahan Weerasooriya

‘ Back to normal’ : A hill country tea estate.

Reports received by us from tea brokers, the Colombo Tea Traders’ Association (CTTA) and other sources indicated that, by and large, the local tea sector has been spared by the recent weather havoc.

The CTTA in their recent communications said that although Cyclone Ditwah affected parts of Sri Lanka, production, sales, and exports of tea continued without interruption. Clearly, the report said, the well established and highly coordinated industry network was fully geared to confront these issues. Production and sales continued with least disruption . While some tea growing areas in Uva, and the Central Province experienced some impact no loss in manufacturing capacity was reported.

Damage was largely confined to specific roads, resulting in temporary disruptions to transportation. Some key routes connecting plantations to the city have now been reopened and transport services are resuming normal operations. Harvesting operations are gradually returning to normal with access roads being reopened and temporary roads have been constructed to facilitate transport of green leaf to manufacturing locations.

The tea small holders we met said, although their production routine was affected, quick return to normalcy was ensured thanks to the established Tea Small Holders’ Association whose action ensured speedy return to normalcy. They reiterated production was near normal; and the dismal situation was now in a controlled position. They assured that such losses were minimal and could be recouped with minimum delay.

The CTTA further said the majority of plantations and small holder lands in the South of the island were spared cyclone damage. Harvesting, manufacturing and transportation activities are continuing as usual.

Trading activities at the Colombo Tea Auctions continue to be held although with a revised calendar. The tea auction previously set for the 1st week December has been rescheduled for the last week December. This adjustment ensures uninterrupted financial flows to the producers , including small holders, maintaining the momentum of the industry.

Forbes and Walker Tea Brokers reported a national tea sale average for November of Rs. 1137.22 ( USD3.89) which shows an increase of Rs.61.17 and USD 0.02 YOY. The total National Sale Average for the year 2025 ( to date) was recorded at Rs. 1,164.97( USD 3.88). a decline of Rs . 63.49 ( USD 0.17) against the corresponding year’s average of Rs. 1228.46 (USD4.05). The report further said all elevations recorded negative variances during the period January to November 2025 in comparison to the cumulative corresponding year of 2024 in both LKR and USD terms.

By Steve A. Morrell

Business

Elephant House Ice Cream marks historic launch in Australia

Published

5 hours ago

2025/12/30

Sahan Weerasooriya

Ceylon Cold Stores PLC (CCS), a subsidiary of John Keells Holdings PLC, has launched its iconic Elephant House Ice Cream in Australia, marking a bold step in the brand’s global expansion. The official unveiling took place on 4th December 2025 at the Novotel Melbourne Glen Waverley, where industry leaders, local distributors, and strategic partners gathered to celebrate the occasion. The launch was further honoured by the presence of Ms. Pradeepa Seram, Consul General Designate of Sri Lanka, and Ms. Cassandra Fernando, Member of the Australian Parliament, reflecting the deep and growing connections between Sri Lanka and Australia.

Elephant House is one of the highest-penetrated Sri Lankan brands among Sri Lankan communities living overseas, with a presence in 16 countries, including the Maldives, Australia, and the United Kingdom, among others.

In a significant milestone for the company, Elephant House Ice Cream is now manufactured locally in Melbourne to support wider availability in the ethnic market in Australia. The range currently available includes Vanilla, Karutha Kolomban, and Fruit and Nut in 500ml packs. This marks the first time in CCS’s 150-year legacy that Elephant House Ice Cream has been produced outside Sri Lanka, signalling a new chapter in the company’s international growth journey in collaboration with Millennium Imports Pty Ltd, it’s one of the franchise partners for Australia.