Greater Russia is now a full-spectrum commodity superpower, less vulnerable to sanctions than Europe
The West’s pain threshold is about to be tested – Fortress Russia will endure this contest of self-reliance more stoically than Europe
This article is by Ambrose Evans-Pritchard for the Telegraph - 24.02.22
In a matter of hours, the world order has turned drastically less favourable for the western democracies.
Vladimir Putin’s seizure of Ukraine elevates Russia into a full-spectrum commodity
superpower, adding critical market leverage over global grain supply to existing strategic depth in energy and metals.
We wake up to the sobering reality that Russia is too pivotal for the international trading system to punish in any meaningful way. It influences or determines everything from bread in the shops, to gas for Europe’s homes and power plants, to supply chains for aerospace and car plants, or soon will do if Kyiv falls.
Who knew that almost 90pc of Europe’s imports of rapeseed oil comes from Ukraine, or Spain's jamon iberica depends on grain feed from the black earth belt of the Ukrainian steppe?
Ukraine turns Putin’s neo-Tsarist empire into the Saudi Arabia of food, controlling 30pc of global wheat exports and 20pc of corn exports.
It is not just Brent crude oil that has spiked violently, hitting an eight-year high of $102. Aluminium smashed all records on Thursday. Chicago wheat futures have hit $9.32 a bushel, the highest since the hunger riots before the Arab Spring.
Do not confuse this with inflation. Rocketing commodity prices are a transfer of wealth to exporters of raw materials. For Europeans at the sharp end, it acts like a tax, leaving less to spend elsewhere. It is deflationary for most of the economy. If it continues for long, we will slide into recession.
So while there is brave and condign talk of crippling sanctions against Russia, it is the West’s pain threshold that is about to be tested. My presumption is that Fortress Russia will endure this contest of self-reliance more stoically than Europe’s skittish elites.
Sanctions are of course imperative as a political statement. The West would be complicit if it did nothing. But the measures on the table do not change the equation.
The debate in Parliament over whether to hit a few more oligarchs or restrict City access for more Russian banks has bordered on parody: Brits talking to Brits in a surreal misunderstanding of raw geopolitics, as if Putin was going to give up his unrepeatable chance to snatch back Kyivan Rus and shatter the post-Cold War dispensation of Europe because David Lamy is vexed by golden visas.
Nor does the temporary German suspension of Nord Stream 2 change anything. The pipeline was never going to supply extra gas this decade. The Kremlin’s purpose was to reroute the same Siberian gas, switching it from the Ukrainian corridor to the Baltic, depriving Kyiv of self-defence leverage.
Once Putin controls Ukraine, Nord Stream 2 instantly becomes irrelevant.
The cardinal error was made in June 2015 when Germany went ahead with the bilateral pipeline just a year after the annexation of Crimea, signalling that the first Anschluss of 21st Century Europe would go unpunished, or worse, that it would be rewarded with a strategic prize.
If you want to date the death of a sovereign democratic Ukraine, it was that Merkantilist decision. Royal Dutch Shell was an abettor. Putin got our measure.
The 36pc fall in the MOEX index in Moscow on Thursday morning means that western investors with a Russian portfolio through pension funds or ETFs have lost money. It does not mean that Russian is being forced to its knees, as some would have it.
Nor does the modest decline in the rouble imply unmanageable economic stress. Russia’s exchange rate mechanism is designed to let the currency take the strain, cushioning the internal budget against shocks.
Biden and Putin