Drip No More?
Although the Ukraine war has affected the entire world, no one has had to weather the storm like Europe. The European Union and Russia had many economic links despite the coldness between them, but all of those were cut just as Russia made its first steps into Ukrainian soil. The EU’s GDP exceeds Russia’s by an immense margin, with some of its member states outpacing Russia. Despite this, Russia has the EU in a chokehold, and at any moment it can choose to snap the neck with the one advantage it has.
The EU is reliant on Russia for its oil and gas needs. Before the war, many nations in Europe received its energy needs through many supply routes including the Nord Stream Gas Pipeline, which stretches from Russia to Germany across the Baltic Sea. From Germany, the gas would be used to provide energy to parts of the European Union, and this kept the European economy running smoothly. The pipeline was not shut down when the war started, but Russia has cut supplies to many countries, with one of the exceptions being Germany, which distributes on to neighboring countries. Russia has been attempting to use it as leverage, and it might lead to economic doom for Europe.
Last Monday, the Nord Stream Pipeline shut down for annual maintenance and is scheduled to finish in 10 days. Europeans fear that Russia will extend the maintenance by whatever means necessary, and if supplies aren’t switched on by Thursday, then the European Union will face a horde of problems. Energy rationing would have to occur, and prices would skyrocket so that stockpiling can increase to meet the demands expected this coming winter. Germany’s reliance on Russian energy for its economy is the killer: their petrochemical and manufacturing industries are key to the highly interconnected European economy, and rations are likely to hit them first to provide energy to citizens and hospitals. Supply chains would be destroyed, and it would increase the chance of recession in Europe, which would affect the world.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
