War in Ukraine: the world economy is shaking

• Gas and oil

Russia is one of the world’s leading producers of gas and oil, and investors are panicking about potential disruptions to hydrocarbon supplies. So far, economic sanctions have bypassed the energy sector, but the US, less dependent than Europe due to its national production, is now talking about a ban on Russian oil imports. Russia is the world’s second largest exporter of crude oil.

Oil prices, whether North Sea Brent or US WTI, approached their all-time highs on Monday, briefly above $130 a barrel for the first time since 2008. The price of gas on the same day reached a historical record in Europe, at the level of 345 euros per megawatt-hour. The European Union imports 40% of its gas from Russia.

• Agricultural products

Russia, which in 2018 became the world leader in wheat exports, “key” feed the planet, but Ukraine’s export opportunities are also a concern. Two countries are united “grain warehouse” for the rest of the world. In Europe, the price of wheat has skyrocketed since the start of the conflict and on Monday reached an unprecedented price of 450 euros per ton.

Export grain from the country, bypassing the ports, “(Ukrainian) railway operator wants to export wheat, corn and sunflower through the railway network to neighboring countries (Romania, Hungary, Slovakia and Poland”, – Inter-Courtage broker comments in a note. Other countries, such as Bulgaria, are taking measures to restrict exports, Hungary even banning the sale of cereals abroad, helping to reduce supply in a market that was already very tight before the invasion.

“Lebanon is 50% dependent on Russian and Ukrainian wheat. This means that for some countries this will be a more dramatic increase in prices than for us. There will be a shortage.also wary is Christian Lambert, president of the first organization representing farmers in Europe, Copa-Cogeca.

According to the specialized firm Agritel, “It is on sunflower oil that the greatest danger gravitates”. As far as the eye can see, famous for its sunflower fields, Ukraine is the world’s leading oilseed producer and the world’s leading exporter of oil and “The situation on the world oil market is very tense”— analyzes Sebastien Poncelet, Agritel expert.

• Metals

industrial metals “most exposed” Russian sanctions from the international community include aluminum, nickel and palladium, Capital Economics believes.

The Russian group Rusal is the second producer of industrial aluminum in the world. This metal hit a new all-time high on the London Metal Exchange (LME) on Monday at $4,073.50 per ton. As for nickel, it’s Nornickel Norilsk, which is run by oligarch Vladimir Potanin. In 2019, Russia was the third largest producer of nickel ore after Indonesia and the Philippines, but the second largest producer of refined nickel after China.

According to Capital Economics, after the military invasion, 7% of the world market for refined nickel “may be affected” possible sanctions. However, the metal, also breaking records in the markets, is one of the most sought after on the planet for electric battery plants, which should enable the automotive industry to move away from oil.

For palladium, which also set an all-time record of $3,442.47 an ounce, of which Russia controls 50% of the global market, the car is also in the forefront. Used to make catalytic converters.

Titanium, a metal valued by aircraft manufacturers for its lightness and very high strength, is also an indirect issue in the conflict. The Russian company VSMPO-Avisma, founded in 1941 in the Urals, is the world’s leading supplier of aircraft equipment, according to Olivier Andries, CEO of aircraft engine manufacturer Safran. “storage for several months” behind him.

Inflation: 22 billion compensation

Faced with rising energy prices, the French government has planned to spend about 22 billion euros on measures to support purchasing power, Economy Minister Bruno Le Maire said. Gas price freeze expected to cost “probably 10 billion euros for the whole of 2022”against the 1.2 billion euros budgeted so far, he explained on RMC/BFM TV. “Restriction of tariffs for electricity” in turn worth “8 billion euros and inflation compensation 4 billion euros”.
• Macron vows to “improve” gasoline aid. Presidential candidate announces government aid for gasoline will “enhanced” around “Mileage Adjusted and Inflation Adjusted Approach” cope quickly with rising fuel prices. This part of the entity “strengthen, including through synchronization, the equivalent of the mileage allowance.” “A surcharge will be made on the gasoline part, because it is right and should be done. This will work with both a mileage allowance and an inflation allowance.he added.
At the end of January, the government announced a 10 percent increase in the mileage compensation scale.
“This is more relevant than long-term tax cuts because fuel taxation is being used to fund our energy transition.”he continued.

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