Commentary Directory
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- A Strong March Leads to a Surge in Chinese GDP in Q1 2023
- Durable Goods Retail Sales Suffer from High Interest Rates and Wary Consumers
- Choppy GDP Means UK Should Avoid Q1 Recession
- Japanese Consumer Confidence Jumps to Highest Level in Over a Year
- The End of Summer Sees the End of Disinflation in Europe
- Labor Market Indicators are Starting to Unify on Easing in Hiring
- Inflation and Tight Financial Conditions Weigh on the German Consumer
- Euro Area Money Supply Contracts for the First Time Since 2010
- Dismal Economic Data Out of Germany
- Core Durable Goods New Orders See Gentle Uptrend in July
- More UK Data Pointing to Q3 Decline
- Whispers of a UK Contraction in Q3
- Japan's Core Inflation Resumes Uptrend in July
- Early July Economic Data Leads to a Sharp Increase in Q3 Growth Expectations
- UK CPI: Energy Inflation Crashes but Services Inflation is Still Sticky
- China's Weak Start to Q3 Means More PBoC Easing
- A Breather for the Eurozone as Inflation Hits Two-Year Low
- Germany's September CPI Report: A Clearer Picture of Inflation Trends
- US Manufacturing Demonstrates Resilience Amidst Volatility in August
- The ECB Prepares to Address Excess Liquidity Through the MRR
- Bank of Japan is Too Optimistic on Inflation
- The Bank of England Pauses in a Near Split Decision
- UK Inflation August Update: A Precursor to the Bank of England's Announcement
- Housing Starts Tumble in August Amid Rising Mortgage Rates
- US Retail Sales Grow at Fastest Monthly Rate Since the Start of the Year
- US Consumer Prices Surge in August Driven by Energy Costs
- August NFIB Survey Showed a Tough Environment for Small Businesses
- All Signs Point to a Weaker Labor Market in August
- Chinese CPI Trying to Buck the Deflation Trend
- Energy Prices Rise but the Core Disinflationary Trend is Maintained in September
- PPI's Quiet Rise and the Energy Elephant in the Room
- Small Businesses Grapple with Inflation and Financial Strain in September
- A Wacky September Jobs Report Shows Strong Labor Market
- A Look at the Fragile US Labor Market Ahead of the Nonfarm Payrolls Report
- Thoughts on GME and This Week in the Stock Market
- Record Home Price Levels Point to Strength in Post-Pandemic Economy
- The Stock Market Looks Overvalued, but It's Probably Not
- China GDP Growth Surpasses Expectations
- President-elect Joe Biden Introduces His "American Rescue Plan"
- Political Polarization Intensifies with Another Impeachment Along Party Lines
- Metal Demand Has a Bright Future in 2021 and Beyond
- What Happened to That US-China Trade Dispute?
- Civil Unrest, A Rising Threat to the 2021 Economy
- What's in the $900 Billion Relief Plan?
Russian Energy Import Ban on the Table
Jacob Hess
March 07, 2022
- Energy
- Russia
Oil and gas import bans are now on the table after the first round of economic sanctions have failed to de-escalate Russia's invasion of Ukraine. NATO nations, particularly European nations, were hesitant to push for a ban on energy imports because it would be a self-inflicted wound in the form of surging inflation as energy commodity prices would no doubt increase above their already elevated level.
The EIA provided a pretty good explanation why. European gas supplies come from three main sources, the US, Qatar, and Russia, which provided almost 70% of liquefied natural gas (LNG) in 2021. The oil and gas import ban would threaten the 20% share that flows through Russia. In 2021, that was a total of 10.7 Bcf a day imported in Poland, Germany, and Slovakia. The rise of Russia as an importer of gas to Europe is relatively new, but the dependence has developed quickly. Pivoting to other key sources like the US and Qatar would likely be more difficult and take some time due to logistics, but it would be a necessary step if import bans came about.
A small silver lining can be found in the European Union's steps to increase the share of renewable energy use to make progress towards climate targets. It has helped reduce overall natural gas imports fall from a peak in 2019. That fall should continue in the next few years, and now it will could happen at a faster pace given new motivations to wean itself off fossil fuel imports from a warring neighbor. However, renewable resources are not nearly bulky enough to protect the EU nations from the economic pain that would come.
From Russia's perspective, a ban on energy exports deal another crippling blow to its economy and allow for more selling of the ruble. The crashing of the Russian currency could be a replay of the 1998 currency crisis that the nation experienced after it fell badly into debt which led to a default and extreme currency controls by the Russian central bank. Of course in that period, oil was around $25 a barrel and declining, so the power that Russia has as an energy superpower now did not exist then. At the moment, this is the only economic power that could keep the economy afloat so long as it can find buyers for its oil and gas which are trading near record highs.
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