Tilak Doshi Contributors
I analyze energy economics and issues related to public policy.
We are living in “exciting times” when Chinese Curse will have it:
“Russia’s war against Ukraine could become the world’s worst energy crisis since the 1970s, says a leading economic historian.” Business InsiderMarch 4thorder
“The worst crisis since the second world war”: Germany prepares for a Russian gas embargo, Financial TimesApril 21st
The Governor of the Bank of England said: ‘A food shortage apocalypse is threatening’”: Sydney Morning HeraldMay 17order
“Forty-nine million people in 43 countries are just one step away from escaping hunger, the Secretary-General warned during a press conference before the Security Council on Conflict, Food Security.” United NationMay 19order
Consequences of Russia’s invasion of Ukraine on 24order In February, the US, UK and the European Union, along with their closest allies, imposed unprecedented and comprehensive economic attack over a sovereign state in recent history. Western Union usurp half of Russia’s Central Bank’s foreign exchange reserves are held abroad – worth about $650 billion – and have blocked key Russian banks’ access to the SWIFT international payments system. All-out economic war was launched into Russia with the aim of devastation the Russian economy, crashing the ruble and possibly leading to mode change with the overthrow of President Vladimir Putin. President Joe Biden speak “Putin has to go” in unscripted remarks, and not to be outdone, one US senator even welcome The assassination of Putin. This was immediately cheered by commentator on the media.
Financial sanctions took effect immediately and the Russian ruble has nearly halved in value, to $136 from its pre-invasion level of about 70. The Moscow stock market received close the door. It looks like the country’s economy faces a devastation in a short time. Notably, the ruble soon recovered strongly beyond pre-invasion levels. On Friday, the ruble was trading at 61.5 against the dollar, making the ruble world’s best performing currency against the dollar in 2022. The value of the ruble is hardly a comprehensive indicator of Russian economic activity but other indicators, such as recent central bank cuts interest rate from 17% to 14% and the continued health of retail spending in cafes, bars and restaurants, showing that Russia’s economy is doing well despite widespread Western financial sanctions.
Russia is not Cuba, North Korea, Iran or Venezuela. The “experts” often quoted in the media indicate that Russia’s GDP is comparable for the EU’s economic lagging behind Spain, as if that explains Russia’s potential limit on geopolitical issues. But geographically, Russia is the largest country on earth with 140 million citizens across 11 contiguous time zones. It has the world third strongest army command largest arsenal of nuclear warheads. Above all, it is a powerhouse in exporting goods. Ambrose Evans-Pritchard’s Daily telegram call Russia is “a comprehensive commodity superpower, less affected by sanctions than Europe itself”.
Russia is a major food producer and a leading country in the world third largest wheat producer and top net exporter. It is also the largest in the world fertilizer exporter and ranked third in aluminum export and ranked 4th or 5th among the largest people in the world iron and steel exporters (depending on whether the EU as a whole is ranked on this list). It is also a leading exporter of important industrial metals such as palladium, platinum, nickel and copper, which are crucial to the West’s ambitions for an “energy transition” to renewable energy. such as wind, solar and electric vehicles. Most importantly, Russia is a heavy fossil fuel exporter on the world market. It should be noted that fossil fuels still account for about 80% of global energy consumption. That is largest natural gas exporter in the worldthe 2nd largest oil exporter (after Saudi Arabia) and third largest coal exporter (after Australia and Indonesia).
Russia strengthens defense with its ruble…
In response to the “shock and horror” financial sanctions introduced against Russia, President Putin signed a Orders on March 31st requires all “unfriendly” countries – that is, those that have implemented unilateral financial sanctions against Russia – to pay in rubles for its natural gas. EU leaders protest that the Kremlin’s demand for “rules for gas” is against “respect contract“. In their view, the unilateral appropriation of Russian sovereign property by the Western alliance should not be considered a breach of contract. Nor has the US administration hesitated to weaponize its dollar hegemony to exclude Russia from the international financial system.
Two months after EU leaders rejected the Kremlin’s “rules for gas” plan, at least 20 European natural gas importers including leading companies such as ENI, Uniper and OMV have moved on. Opened account with Gazprombank to allow payments in rubles, with fourteen other importers requesting similar facilities from the bank. Russia stop supplying gas to Poland and Bulgaria in April and to Finland on Friday for not paying for their gas supplies in rubles. After weeks of conflicting advice from Brussels, the EU has just issued consent to pay for Russian gas in member rubles.
On the more alternative oil front, the US, UK, Canada and Australia have banned crude oil and refined products from Russia. However, the EU has yet to act as Europe is more dependent on Russian oil imports. About 27% of EU oil imports come from Russia. On May 4, the EU proposed a ban on Russian oil imports by the end of the year but consensus is not reached when Hungary vetoed the move. And while EU ports are effectively closed to Russian tankers, Greek ship owner Russia’s share of the oil shipping market in April tripled compared to the 2021 average. Strong lobbying by Greek shipowners pushed the EU to lift sanctions on its oil exports. Russia to third countries.
So far, Russia has largely mitigated the impact of sanctions on its oil trade. Indiaand to a lesser extent China, snagged shipments of cheap Russian crude shunned by the Western alliance. India now accounts for about 10% of Russia’s oil exports, from near zero in early 2022. In the first week of April, Russian oil exports rebounded. level before the invasion. As commodity prices for fuel, food, and fertilizers have increased since Russia sanctions, Russia’s current account is in a larger surplus. tripled in the first four months of the year to $95.8 billion.
… And Europe goes to economic suicide
The EU depends on Russia for more than 40% of its natural gas supply, while Germany’s dependence on Russia is even higher, at around 50-60%. In early March, on a proposal to weaken Russia’s financial ability to launch an attack on Ukraine by placing constraints on the country’s major commodity and key energy exports, the Committee Europe announced plans cut the EU’s dependence on Russian gas by two-thirds this year and end its dependence on Russian fuel supplies “by 2030”. This is an order of magnitude higher by any measure. Like the European Union’s ambitious Green Deal goal, driven by Germany, of “zero net worth by 2050”, it has little chance of coming close if economic and material laws are to be met. logic related to it.
Europe has no choice but to spend billions of Euros per month on Russian pipeline natural gas in the short term (i.e. can last 3 to 5 years). Supply-side solutions it will take many years for the necessary LNG infrastructure and alternative suppliers with additional capacity to achieve the EU’s diversification efforts. Meanwhile, the German leaders have only “required side measures” to use. In common parlance, this means “austerity”. Certainly, draft proposals from the European Commission are viewed by Financial Times say “[t]The EU will also have to cut energy consumption more than previously thought to meet its ambitious net-zero carbon emissions targets by 2050.” Not to be outdone in energy holdings, the climate warning organization IEA – now better known for its unnecessary defense for all things Greener is a trusted energy research organization – officially launched with 10 point plan reduce fossil fuel use in Europe to “help Ukraine” based on the support of European consumers.
Germany’s Bundesbank stated at the end of April, in a “severe crisis scenario, real GDP in the current year would fall by almost 2% compared to 2021,” and “inflation would be significantly higher over a longer period of time.” “after the embargo. A more recent study of the impact of an immediate embargo on Russian gas exports to Germany estimates that it could reduce GDP by 12% by 2022. Manfred Knof, CEO of Commerzbank – Germany’s second largest private bank – warning that a “bankruptcy tsunami” could knock out Europe’s largest manufacturing hub as the risk of inflation increases due to Western sanctions on Russia’s energy exports.
Medvedev’s Boomerang
The “global campaign” against Russia reported by the mainstream media is nothing like it: the vast majority of countries outside the transatlantic alliance of the US, EU and its close allies. Their closest relatives, which account for more than 80% of the world’s population, have not participated in anti-Russian sanctions. The “clear unity of purpose” in the US and Europe for Russia sanctions means nothing to most governments in the Middle East, Asia, Africa and Latin America who intend navigate the rapidly diverging world economy. This is also not evident in the EU’s failed efforts to reach consensus on a plan to embargo Russia’s energy exports.
Dmitry Medvedev, former President of Russia and current Vice Chairman of the Security Council of the Russian Federation, Written on Telegram: “Just a few weeks after imposing ‘monster’ sanctions on Russia, it is expected that they will return to the West.” For leading developing countries such as Brazil, India , China and South Africa, protecting their free trade with a commodity superpower like Russia is just as important as making sure they don’t become the next victim of a dominant globalizing West. While officials in Brussels and Washington DC push their coveted renewable energy dreams, the rest of the world must start with business. normal for a living.
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