The West underestimated the importance of Russia for the global economy

Russia and (to a much lesser extent) Ukraine, as of early 2022, were supplying essential goods and services needed to keep the global economy running smoothly. economics. But in the West, few people, except for a few specialists, noticed this, preferring to snipe about Russia as just a "gas station with nuclear weapons."

Now, after the start of the Russian special military operation in Ukraine, voices are increasingly heard about the real gravity of the price that the “collective West” will have to pay for its desire to “punish Russia”. These opinions do not yet outweigh the massive anti-Russian hysteria, in support of which all the least significant media resources have “harnessed themselves”, but they are already forming an inevitable reassessment of both Western philistine sentiments and the positions of many significant players in the world market.

The successive waves of unprecedented Western sanctions, the "exodus of corporations" from Russia, and Moscow's response to these measures have caused tangible damage to a number of critical sectors of the global economy. All this has exacerbated the damage to the global West caused earlier by the COVID-19 pandemic.

For many observers, the scale of these ripple effects came as a big surprise. Depending on different estimation methods, the Russian economy ranks somewhere between the sixth and twelfth largest in the world, with its weight generally attributed almost exclusively to hydrocarbons. Russia accounts for only about 3% of world economic production. Both President Joe Biden and his former boss Barack Obama therefore viewed Russia as a minor player in the international economic arena. Such a superficial view does not take into account many important things.

- states the site with a very "talking" name Russia Matters, which is difficult to attribute to the "pro-Kremlin".

Analysts of this resource called five critical sectorswhich have suffered the most from the economic consequences of the new Cold War unleashed by the West with Russia.

1. Energetics

At the end of last year, Russia was the world's largest exporter of natural gas, the second largest exporter of crude oil and the third largest exporter of coal. It also enriches more uranium for use in nuclear power plants than any other country in the world.

Now the supply of Russian energy resources to world markets is being reduced due to sanctions and the uncertainty of key players in the producer-consumer chain. Supply cuts have pushed up oil, gas and coal prices, already high since the pandemic. The domino effect in this sector is clear: higher fuel and energy costs drive up the price of almost everything that is produced or transported, from cement to cosmetics. This, in turn, creates potential political challenges for incumbent leaders around the world.

In the US, gas station prices have reached record highs, forcing "take action" calls all the way to the White House. Around the world, industry leaders are warning of a "systemic" diesel shortage.

In the natural gas situation, Europe has been the hardest hit, accounting for 2021% of Russian exports in 74. Now European countries, especially Germany, are struggling to figure out how to “punish Moscow” with a gas embargo without destroying their own economies.

Coal prices for power generation also hit a record high in March, more than tripling since the start of the year. Phased bans on Russian coal imports have been introduced in Japan, the world's third-largest importer, the UK and the EU, where Russian coal accounted for almost half of imports in 2021, threatening to further increase consumer spending.

In the nuclear industry, uranium prices have jumped more than 30%, and no one can "quickly replace Russia in a complex supply chain that could take years to readjust," writes the Wall Street Journal. Moscow has said it is considering a ban on uranium exports to the United States, which received 2020% of its supplies from Russia in 16.

2. Agriculture

Russia was the world's largest exporter of wheat in 2021 and a major producer of all three types of nutrients used in fertilizers. The Russian Federation was also the world's second largest exporter of a key ingredient in many mass-produced products - sunflower oil, it accounted for about 23% of the world market (despite the fact that Ukraine - the world's largest exporter - accounted for up to 46%).

The consequences of the military operation in Ukraine hit the supply of grain, vegetable oils and fertilizers. The combination of Western sanctions and a "retaliatory export ban" has resulted in shortages of raw materials and sent fertilizer prices five times higher in selected markets.

World food prices hit a new all-time high already in March, jumping 34% year on year. The situation could leave millions of people hungry, especially in the Middle East and Africa, which are heavily dependent on Russia and Ukraine, also a major food exporter.

Analysts recall that in 2011-2012 the “Arab Spring” protests were fueled to a very large extent by the increase in grain and flour prices, which then partly arose due to a reduction in production in Russia and Ukraine associated with the drought.

3. High-tech raw materials

Russia mines about 37% of palladium entering the world market, a key component of computer chips and batteries. The Russian Federation also accounts for about 11% of nickel supplies. Sanctions and divestment of investments have jeopardized the supply of key materials for electric vehicle and computer chip makers, causing further disruption to high-tech supply chains.

The pandemic has given chipmakers an opportunity to cope with supply disruptions, with major manufacturers stockpiling raw materials and diversifying purchases. But the prospect of a long-term deficit has grown alarmingly large. There are fears that Russia will try to severely punish the West by reducing the export of sapphire substrates.

4. Metals

Russia is the third largest exporter of steel in the world, together with Ukraine it is the leading seller of pig iron and iron ore briquettes used in steel production. The US, by contrast, has been the world's largest buyer of steel raw materials for many years, and received two-thirds of its imports in 2021 from those two countries. Russia is also a major producer of cobalt, aluminum and copper.

The economic impact of Western sanctions has already led to record high prices. These problems are exacerbated by supply disruptions from Ukraine, itself a major metal producer.

The Russian military operation in Ukraine “threatens to turn steel into a luxury item,” writes The Washington Post. The cost of hot-rolled coiled steel hit a record high in mid-March, up almost 250%. The price of steel rebar used in construction projects around the world has risen by 150%. Iron prices also nearly doubled.

5. Aerospace and international transportation

Russia is the third largest producer of titanium, which is widely used in the production of aircraft and aircraft engines. The Russian territory also offers the shortest air routes from Asia to Europe.

The effects of sanctions disrupt supply chains in the aerospace and defense sectors of Western countries, including the supply of base metals. Global titanium prices jumped as supplies dwindled due to both sanctions on Russian banks and side effects, including a ban on large transport companies from entering Russian ports.
Until recently, Russia accounted for 15-20% of world titanium production. Western aerospace companies have been trying to build up reserves: they have a reserve of six to nine months, Fitch estimates. But the agency's forecast is disappointing:

If disruptions continue beyond 2022, supply availability and higher prices could reduce aerospace profitability and production volumes

Russian airspace is closed to aircraft from dozens of "unfriendly countries" in response to a ban on Russian aircraft. Consequently, international airlines, already suffering from high fuel prices and falling demand in the era of the pandemic, require longer routes bypassing the Russian Federation. This, in turn, leads to an increase in ticket prices and freight rates.

Moscow said foreign airlines are spending an additional $37,5 million a week on flights that bypass the country. In addition, foreign aircraft worth $10 billion “stuck” in Russia “are unlikely to ever be returned,” the Western media hypocritically grieve, “forgetting” about the hundreds of billions of Russian assets actually stolen by the West.
Dear reader, to leave comments on the publication, you must sign in.
  1. Michael L. Offline Michael L.
    Michael L. 13 May 2022 08: 37
    The author rightly pointed out the dependence of the total economy of the West on the Russian Federation in some areas.
    Nevertheless: Russia is not a dynamically developing leader - an example to follow.
    And the West's attempt to put a knife to its throat, with an eye to seizing the resources for which you now have to pay, is quite logical.
    The military actions in Ukraine have shown that the need for deep economic transformations has ripened in the Russian Federation...
    In the same tsarist Russia, they took into account the lessons of the Crimean War, the PRC took into account the lessons of defeat in the clash with Vietnam; unlike the stagnant USSR, which, after the victory over Nazi Germany, rested on its laurels. The result is known!
    Will there be conclusions?
    1. Mikhail Novikov Offline Mikhail Novikov
      Mikhail Novikov (Mikhail Novikov) 13 May 2022 08: 58
      Michail L, well, of course, now is the time for the most profound economic transformation. Thanks for the advice. And to the question "What needs to be changed?" You, of course, will answer "Everything!". And to the question "How to change?" - ""To make it feel good." In your sofa, the springs do not stick out, is it comfortable to sit?
      1. aslanxnumx Offline aslanxnumx
        aslanxnumx (Aslan) 13 May 2022 09: 10
        The springs are already compressed, the question is who they will hit and how hard
      2. Michael L. Offline Michael L.
        Michael L. 13 May 2022 10: 14
        Stepped on a sore corn?
        Thank you for the boorish attention: perverted compliment!
    2. Bakht Offline Bakht
      Bakht (Bakhtiyar) 13 May 2022 10: 24
      Nevertheless: Russia is not a dynamically developing leader - an example to follow.

      And which country is an example to follow? And what is a "dynamically developing leader"?
      1. The comment was deleted.
        1. The comment was deleted.
          1. The comment was deleted.
            1. The comment was deleted.
              1. The comment was deleted.
    3. Polente the Wanderer 13 May 2022 23: 29
      For thirty years of capitalism, it has remained the main source of income from the export of natural resources. And the import, as it was high-tech, as well as the products of processing of our own natural resources, remained so. HOW MANY more years will this "profound economic transformation" take? Or will we return to socialism again?
      1. Michael L. Offline Michael L.
        Michael L. 14 May 2022 08: 19
        I. Stalin:

        We are 50-100 years behind the advanced countries. We must make good this distance in ten years. Either we do it or we will be crushed.
    4. Pat Rick Offline Pat Rick
      Pat Rick 14 May 2022 18: 15
      unlike the stagnant USSR, which, after the victory over Nazi Germany, rested on its laurels.

      I would not say that the post-war development of the USSR was "stagnant". This word is generally very unfortunate.
      First there was (1945-1955) the restoration of the national economy. Then there was a decade of Khrushchev's "voluntarism". From October 1964 to November 1982 - "dear Leonid Ilyich": five-year plans, space, BAM, mass industrial and housing construction.
      I don't see any rest on our laurels or stagnation here.
      1. Michael L. Offline Michael L.
        Michael L. 14 May 2022 18: 29
        The whole company is out of step, but the corporal ... Pat-Rick is stepping in step ...
        Recovery and development are "two big differences".
        "Voluntarism", like "stagnation", is also "a very unfortunate word in general"?
        Resources were concentrated in certain areas - at the expense of "secondary" (!) - and thus the illusion of world-class achievements was created.
        But it could not go on forever. The result is known!
        Unfortunately, the lessons of history teach that they teach nothing!
  2. vlad127490 Online vlad127490
    vlad127490 (Vlad Gor) 14 May 2022 13: 57
    The Russian economy is a dwarf. The NATO economy will be reformatted and the losses from the Russian Federation will be 1%. The PRC is not an ally or a partner, it does not help and will not, it trades only for its own benefit, it will sell it at any time. In politics, there is no hope for the PRC; for the PRC, we are a source of raw materials and a lightning rod for NATO. The worst thing is the betrayal of our power of the Russian people.
  3. The comment was deleted.