In December 2021, a real crisis began to emerge between Russia and Ukraine, with the Russian government sending more than 100,000 troops on the Russian-Ukrainian border, angering the United States, NATO and European countries over the move and threatening the Russian government from any attempt to invade Ukraine, followed by violent economic sanctions against the Russian economy. But these political tensions will have major implications for the global economy, with Russia and Ukraine among the most important exporters of many vital commodities, and we will try to address some of these commodities:
- Oil and Natural Gas
European countries will be the biggest victims of these conflicts due to their near-total dependence on Russian oil and gas, with Russian oil accounting for 30% of European consumption and Russian gas accounting for 35% of European consumption. European countries are currently experiencing a severe energy crisis worse than that of 1970 due to a drop in European gas inventories, which has led to record high gas prices. Meanwhile, the French Energy Ministry announced a 9% drop in its nuclear reactor capacity in 2022, the highest decline in the last three decades.
Qatar's Energy Minister Saad Al-Kaabi said that the volume of gas the EU needs cannot be replaced by any single supplier unilaterally without disturbing deliveries to other regions. This means that European countries cannot find an alternative to Russian gas and the event of any sanctions that could lead to higher gas prices would increase the suffering of Europeans in the coming days. As for the oil prices, they may continue to rise in the event of any sanctions that may be imposed on Russia's oil exports, as happened with Iran.
Rabobank energy analysts believe this could push oil prices up from already high levels of about $90 per barrel to $125, if any sanctions are imposed.
- Industrial Metals
In terms of industrial minerals, Russia's share of global nickel exports is estimated at 49 per cent, palladium by 42 per cent, aluminums by 26 per cent, platinum by 13 per cent, steel by 7 per cent and copper by 4 per cent. And in the current high prices of industrial materials, any sanctions that may be imposed on Russian companies may lead to a further rise in these metals, which might increase the current global inflation problem.
Russia is the world's number one grain exporter, with Ukraine ranked fourth in the world, with Russia and Ukraine accounting for nearly 30 percent of world grain exports such as wheat and maize, and therefore any sanctions on exports could increase the world's current inflationary troubles.
On this level of tensions, the Russian economy has begun to suffer as the MOEX Russia index fell by 26 percent during its last summit in October. Despite the high prices of oil and natural gas, we see that the Russian economy and companies have not benefited clearly and this performance has not been reflected in the market values of companies.
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