CRYPTOCURRENCY SANCTIONS AND AGRICULTURAL PRICE S 1 CRYPTOCURRENCY SANCTIONS AND AGRICULTURAL PRICE S An empirical study on the negative implications of sanctions and how decentralized technologies affect the

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CRYPTOCURRENCY, SANCTIONS AND AGRICULTURAL PRICES

An empirical study on the negative implications of sanctions and how decentralized technologies affect the

agriculture futures market in developing countries.

Agni Rajinikanth

International Economics

CRYPTOCURRENCY, SANCTIONS AND AGRICULTURAL PRICES

Abstract

This research paper focuses on the implications of cryptocurrency to fight and evade sanctions. The

2022 Russia Ukraine War has led to many sanctions being placed on Russia and Ukraine as well as

the nearby locale. The paper will discuss the impact the 2022 Russian Sanctions have on agricultural

food prices and hunger. The paper also uses Instrumental Variable Analysis to find how

Cryptocurrency and Bitcoin can be used to hedge against the impact of sanctions. The 6 different

countries analyzed in this study include: Bangladesh, El Salvador, Iran, Nigeria, Philippines, and

South Africa, all of which are heavy importers of wheat and corn. The paper shows that although

Bitcoin may be volatile compared to other local currencies, it might be a good investment to

safeguard assets since it is not correlated with commodity prices. Furthermore, the study

demonstrates that although transaction counts per day don’t have a strong relationship with prices,

transaction volume does have a strong relationship.

Keywords: Cryptocurrency for Sanctions, Sanctions on Food Prices, Sanction on Russia

Ukraine War, Cryptocurrency during 2022 Russia Ukraine War

CRYPTOCURRENCY, SANCTIONS AND AGRICULTURAL PRICES

Introduction

The 2022 Russia Ukraine conflict has garnered widespread international attention, with many

international players taking on strong stances in the war. Bodies such as the United States, UK, and

the EU have all condemned Russia by laying economic sanctions upon the nation's imports and

exports. Russia and Ukraine are major exporters of the global food and oil supply. These embargos

have stifled international trade causing commodity prices to increase dramatically and creating a

humanitarian crisis. Wheat and Corn are both staple food sources grown in these regions together

amounting to around 66% of the global population’s diet. These crops are stable goods necessary

for survival. Around 30% of the global production of wheat and 15% of the production of corn

comes from both Russia and Ukraine, which affects these prices dramatically

. Production is also

affected by the dramatic shocks in oil prices, which increases the cost of goods transportation and

causes the supply chain issues. Fertilizer, which is the backbone of the food supply, is also a major

exported product from Russia increasing food prices even further. When these agricultural

commodities become overpriced, developing countries and low-income households are impacted

the greatest, leading to hunger and welfare decline.

Although these sanctions are meant to be targeted towards the country’s governments and

elites, innocent citizenry are affected the most as collateral damage from this economic warfare.

These governments and elites have capitalized on cryptocurrencies, a developing technology, which

allows parties to anonymously transfer money without any intermediary helping them evade much of

the impacts of sanctions

. This fosters illegal activity such as sanction evasion through a series of

https://oec.world/en/profile/hs

https://jbonneau.com/doc/BMCNKF15-IEEESP-bitcoin.pdf

CRYPTOCURRENCY, SANCTIONS AND AGRICULTURAL PRICES

protocols. With the increasing use of cryptocurrency in the world, many rich elites are escaping the

impact of these embargoes making the common folk of society carry the bulk of the burden.

The UN’s World Food Programme has identified a dramatic rise in global hunger

malnourishment and poverty because of the rising food prices. The United Nations blames the

Russia Ukrainian war conflict for this global problem causing heightened prices as a result of the

Covid-19 Pandemic to increase much further. The number of malnourished children has increased

drastically by 13 million from 2021 to 2022. The barriers placed on trade because of these

embargoes has threatened the global food supply. The problem has caused other agricultural

commodity exporters such as India and Argentina to withhold their exports to satisfy demand for

their own populations affecting global supply further. While this problem may only pose a minor

inconvenience for the rich class of society who can easily convert assets and mitigate the problem,

Low-income people as well as those in developing countries struggle the most during these times.

When many people are unable to have proper food and nutritional meals, worldwide goals and

progress are set back, which leads to major humanitarian crisis. In some countries these rising prices

lead to currency inflation because of government assistance towards those affected which devalues

the national currency and exacerbates hunger. If the rich can exploit cryptocurrency technologies to

evade sanction measures, common citizens should also be able to hedge against the impacts of the

rising agricultural prices. As cryptocurrencies have become more and more prevalent in society, it is

important to explore if adopting cryptocurrency can help civilians prepare for the rising agricultural

prices and guard against the negative implications of sanctions.

CRYPTOCURRENCY, SANCTIONS AND AGRICULTURAL PRICES

Background

Sanctions on Russia

Many nations have been employing sanctions as tools to punish opponents and enemies

without the direct escalation of war making sanctions an important role in international relations

especially in peacekeeping. But before the 1980’s, sanctions were not a popular tool for international

diplomacy and were not widely used in cross country relations. But with the rise of the United

Nations and other regional organizations such as the European Union, sanctions have become more

popular. As these international bodies grow in membership, political influence, and power the use of

sanctions is often their go-to strategy for punishing entities which threaten international peace and

security.

One of the earliest known examples of sanctions occurred in 432 B.C.E when Athens

prohibited importing and selling of products from Megara in retaliation for a kidnapping. During the

American Revolution, American patriots adopted mass boycotts to pressure the British Empire to

repeal its taxation policies. But this type of sanctions dramatically changed during the world wars

when states prohibited trade, canceled contracts, and confiscated goods of all enemy countries. After

World War II, the United Nations adopted new measures that allowed the security council the ability

to enact economic and diplomatic sanctions, which created a spree of embargos in the 1990s. This

period led to a shift in sanction policy after the 1990 Iraqi sanctions led to a humanitarian crisis. The

negative effect led to reform and brought up the discussion of the ethicality of sanctions as

counteractive measures. As witnessed by the sanctions on Iraq, sanctions not only hurt the political

elites which the sanctions are meant to target but also the common people of the land. Although

slight reforms have been made the problem still exists and is a major issue to this date.

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