The reasons behind this war are many: a quarrel over influence between Russia and the United States on the European arena, a struggle over the geopolitical influence of the two superpowers over Europe through the expansion of the Atlantic alliance in the dissolved “Warsaw Pact” countries, and the attempts of NATO countries to deliver their missiles to the borders. Russian directly.
As if humanity did not lack enough problems during the past two years of the Corona pandemic and what it brought in terms of deaths, injuries, complete closure, and a change in living patterns, the Ukraine war has now erupted in which the conflict over the balance of power between the major countries has erupted.
The Ukraine crisis could have been resolved diplomatically as it was the Berlin crisis of 1961 and the Cuban missile crisis of 1962 during the Cold War. However, it becomes clear that the military solution now is similar to the Korean War of 1950-1953, the Vietnam War of 1955-1975, the Afghanistan War of 1979-1989 and the war of occupation of Iraq in 2003.
Wars are different from one another. It is therefore useless to speculate at such an early stage as to the duration or nature of the Ukraine war. But given the data available to both Russia and Ukraine from huge natural resources of oil and wheat, and given the Western threats to use the weapon of financial and economic sanctions, and also given that this is a war about European security and the influence of NATO, which means that it is a war between the major industrial countries themselves. And not in a side field on another continent, as the risks are grave, not only for these countries themselves, but for the economic challenges that will befall the rest of the world, represented by the impact of the war on disrupting global markets and the rise in prices of basic commodities and industrial goods. Since the majority of developing countries are importers of industrial goods from the conflicting countries, the high prices of these goods, industrial goods and services in Europe will also bear the burden of developing countries, including of course some Arab countries.
Since Russia is one of the major oil and gas producers. This war will affect its oil industry, especially if the United States and European countries implement their threats of sanctions against the financial system and Russian oil exports. In the event that the declared threats of siege and sanctions are implemented, this will confuse the markets, starting with the rise in prices, which exceeded $100 per barrel, and which continue to rise daily during military clashes. The war will also affect the continuation of the operations of Western oil companies in the Russian petroleum sector in terms of the possibility of continuing work in the Russian fields with the participation of Russian companies, and the difficulty of the Russian industry obtaining the necessary machinery and spare parts, which in turn will lead to a slowdown in the development of the sector and a decline in its development plans, meaning the possibility of a decline Production or export capacity in the future.
This is not to mention the expected losses for stopping gas export lines, as Germany announced in the case of the “Nord Stream-2” gas pipeline, which cost 11 billion dollars to build and became operational in September 2021, but is still suspended.
Many countries will be challenged, not just Russia or Ukraine. Germany and the rest of the European market depend for a third of their gas consumption on Russian exports. In order to compensate for supplies that may be stopped, reduced or delayed, other producing countries will have to be resorted to, such as Qatar, the United States, Australia, Algeria or Norway and Egypt (in the event that additional supplies and means of production and transportation are available for them to export). It is also possible that consuming countries, such as Japan or South Korea, divert some of the gas supplies that have been imported, to Europe.
Trying to find gas supplies to replace Europe with gas is not impossible, but it is very difficult. It will take huge efforts to achieve this goal. The reason for the difficulty of compensation is that the gas trade has a specific orientation, as the imported gas is directed directly to the generation of power plants or as feedstock for petrochemical plants. Any delay will lead to stopping the power stations, and this, of course, will lead to many problems with citizens.
Even if European gas is compensated, it is expected that the price equations will differ from those with Russian companies, some of which have been going on since the 1980s.
The problem with the LNG industry is that it does not have the same flexibility as the oil industry. Contracts serve certain power stations, and any change in the volume of supplies or their arrival times negatively affects the continuous production of electricity.
The decisions of the embargo and boycott of Russian gas to Europe will inevitably lead the United States to seize the opportunity to export liquefied gas to European markets to compete with Moscow in one of its most important markets.
Since the last quarter of 2021, the United States has become among the three largest LNG exporting countries (the United States, Qatar, and Australia). American companies export liquefied gas to the Chinese market. However, any attempt to win part of the invading Russia's share in the European market in the long run will create a new conflict between the two major powers.
Washington is also in a difficult situation. During the past months, the administration of President Joe Biden has been trying to publicly pressure the group of “OPEC Plus” countries to increase monthly oil production from 400,000 barrels per day, to help reduce oil prices and curb inflation in the United States, which contradicts the policies of the American administration, especially with the elections. midterm elections in November.
Europe's ability to dispense with Russian gas will lead to a major shake-up in international gas prices and increase its prices, and the repercussions of this will extend to the rise in the price of gas and subsequently the increase in the prices of industrial and petrochemical materials imported by foreign markets, including Arab markets. The rise in the price of gas or the confusion of its trade will in turn lead to an increase in demand for petroleum products and even coal, as happened during the past months.
But despite Germany's previous declaration that it was not ready to import Russian gas through the Nord Stream-2 pipeline in the event of an invasion of Ukraine, no European decision has yet been issued to boycott Russian oil or gas. In fact, the biggest loser will be the European countries themselves. For its part, the Russian company "Gazprom" announced that it is ready to provide its European customers with contracted gas supplies. It is also noted that the United States did not include the SWIFT system ban on transfers, the ban on Russia that it announced after the invasion, which means that the financial sanctions are not as severe as those that were threatened.
It is very likely that the outcome of this war will be negatively affected by the international negotiations to reduce emissions by 2050, given the negative atmosphere that will hang over Russian-Western relations. European countries are also expected to reduce their efforts to quickly switch to sustainable energies due to the economic and financial effects of the war on their countries' budgets.
However, the effects of the Ukraine war are not limited to the major powers. It is also expected that these effects will be reflected in the availability of huge wheat supplies from Russia and Ukraine on international markets. A country like Egypt is totally dependent on importing wheat from Russia and Ukraine. And wheat prices, as oil has begun to rise. As for the extent of the rise in wheat prices and the availability of export supplies at their usual rates, this will depend on how the military conflict develops, how it is reached, and what is the time period for all of this.
The rise in oil prices will, as previous experiences indicate, support the budgets of the Arab oil and gas producing countries (and the same applies to wheat production). As for the Arab countries that do not produce oil or wheat, you will find those countries with deteriorating political and economic conditions more difficult than they are now. The working classes and the poor in these countries (Syria, Lebanon and Tunisia) are currently finding it difficult to meet the needs of their families for food or to obtain transportation costs for workers to and from their homes and workplaces.
Comments
Post a Comment