(Original title: The other side of the Russian-Ukrainian crisis: What if the global “gas stations” and “granaries” face sanctions and threaten inflation?)
Financial Associated Press (Shanghai, edited by Shi Zhengcheng),The situation in the east of Ukraine, which has been turbulent for eight years, made historic progress on Monday, local time. With Putin’s order to recognize the two independent regions, and the Russian army will send troops to maintain peace in the Donbas region, Western countries have expressed their willingness to make preparations. long-term sanctions.
Although it is not clear how many Western politicians’ verbal threats will be implemented, it is undeniable that the Russian-Ukrainian region plays a pivotal role in energy, food, and industrial metals. Continued turmoil or sanctions are very likely to exacerbate the original situation. On the highly tense inflation situation, more and more countries are involved in this storm.
The world‘s largest “gas station” that Europe cannot do without
After a series of latest developments last night, the three Baltic countries next to Russia (Estonia, Latvia, Lithuania) all voiced their demands for the EU to immediately impose sanctions on Russia.
Unlike Ukraine, these three countries with deep ties to the former Soviet Union are also members of the European Union and NATO, and they are also the neighbors that are most actively involved in the Russian-Ukrainian situation. The three countries have also supplied U.S.-made anti-tank and anti-air missiles to Ukraine in the context of obtaining U.S. permission.
But for the EU, sanctioning Russia, especially its energy exports, would be an extremely painful decision.
It should be noted that due to factors such as Russia’s unique economic structure and long-term experience of sanctions, the country’s GDP is only about 1.5 trillion US dollars, which is lower than Italy’s. That’s why Jason Furman, the president’s economic adviser under Obama, called Russia a “big gas station,” implying that apart from oil and gas, Russia has little impact on the global economy.
But the problem is that Europe, and even the United States, cannot live without Russian oil and gas, especially now that the northern hemisphere is still at its coldest of the year.
For Europe, nearly 40% of natural gas and 25% of crude oil need to be imported from Russia, which is why European leaders are calling for sanctions against Russia while asking Russia to supply more natural gas for the winter.
Not only Europe, but also the United States has a huge demand for Russian crude oil. According to BP’s 2021 updated global strategic energy report, Russia, the United States and Saudi Arabia continue to be the world‘s top three oil producers, with a daily output approaching the order of 10 million barrels. But unlike Russia and Saudi Arabia, the U.S. consumes 17 million barrels a day of energy and is a pure importer of crude oil. By the end of 2021, the U.S. needs to import nearly 600,000 barrels a day of crude oil from Russia. This figure means that the US sanctions on Russia’s energy exports will inevitably affect itself.
After the turmoil last night, the price of oil has jumped to $97 per barrel as of press time, just one step away from the key psychological position of $100.
(Daily chart of oil distribution, source: TradingView)
Food inflation will affect more countries
Although most reports focus on the rising crude oil prices, the way for more countries to experience the crisis in Russia and Ukraine more directly will come from the food sector. According to a report by the United Nations Food and Agriculture Organization, the global cereal price index at the end of 2021 has reached a new high since 2012.
(Source: FAO)
According to the UN Food and Agriculture Organization, Russia is the world‘s largest wheat supplier, and Ukraine together account for a quarter of global wheat exports. Countries such as Turkey and Egypt rely on this region for 70% of their wheat imports.
Considering that Ukraine, which has the title of “European granary”, has 40% ofwheatExports go to the Middle East and Africa. For example, 50% of Lebanon’s wheat imports come from Ukraine. Imported inflationary pressures will also increase the instability in an already unstable region.In addition to rations, Ukraine is also the world‘s largestSunflower seed oilproducer and exporter.
Regarding the current situation, Professor Ian Golding, who specializes in globalization and development theory at Oxford University, concluded: As usual, price pressures will be more on the most vulnerable, as lower incomes spend more on energy and The higher the proportion of food.
Global manufacturing will also be hit
After experiencing the new crown epidemic, the global industry has formed a consensus that any link in the industrial chain is in crisis, which will cause the overall production capacity to shrink.
In addition to crude oil and grain, Russia is also a major exporter of various industrial metals.PalladiumThe export volume ranks first in the world, and the same isAluminum, Nickelimportant exporter of other metals. If this part of the supply is lost, the most direct impact is on the automobile manufacturing industry. Both traditional cars and electric vehicles will be affected. In addition, the European aviation giant Airbus also needs to import aluminum from Russia.
Speaking on Monday about possible disruptions upstream in the supply chain, Volvo Chief Technology Officer Lars Stenqvist said it was too early to assess the impact of armed conflict, but it was a very, very serious thing. At present, the company has made plans for different progress at hand, and will pay close attention to the development of the situation every day.