Published: 03.07.2022 – 12:26
The economic consequences of the Russia-instigated conflict in Ukraine are already there. It’s March 7th, a new outbreak of fever in the international markets, with a dizzying rise in the price of oil and gold and a strong fall in the stock markets at the opening in Asia. In Europe, the issue of an embargo on Russian gas, oil and coal is being raised. The issue was dismissed by the German finance and foreign ministers.
Although their Western allies are discussing very seriously the possibility of imposing an embargo, on Sunday, March 6, German finance and foreign ministers said they oppose a ban on imports of hydrocarbons from Russia.
Berlin does not believe in the effectiveness of these weapons against the Russians. “We are ready to pay a very high economic price. But if the lights go out in Germany tomorrow, that won’t stop the tanks.” This is how the head of German diplomacy Annalena Burbock reacted, and her finance colleague reminded of the need to hold out against the Russian occupier over time.
Problematic dependence on Russian gas
According to the Minister of Ecology of Germany, the unilateral termination of the import of gas, oil and coal from Russia threatens social peace in Germany. Recall that Germany imports from Russia more than half of its gas and 42% of its oil, as well as coal.
And it will take years to get rid of this addiction. In an effort to diversify its supplies, Berlin on Saturday, March 5, entered into an agreement to build an LNG terminal designed to receive liquefied natural gas. This is the very first infrastructure of its kind.
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Fever in the markets
Following the Asian stock markets, all European financial markets opened on March 7 with a very noticeable decline. Less than 5% for CAC 40 and less than 4% in Frankfurt. And commodity prices are skyrocketing. Oil is clearly in the black. The price of a barrel of Brent oil from the North Sea on Sunday evening approached $140. Absolute record since 2008. Moscow is the second largest oil exporter on the planet.
Gas prices are also rising. Its European price jumped by 60%, to more than 300 euros per MWh. After that, the prices of raw materials rise. Metallurgy is an important export sector from Russia to Europe. The conflict with Ukraine also led to higher prices for aluminum, copper and nickel. And gold, considered a safe haven, continues to rise.
Another cause for concern, banking stocks have been particularly hard hit. Thus, Societe Generale lost almost 8% and Crédit Agricole lost 6.5%. These two French banks are paying off their trade obligations with Ukraine and Russia.