By Olga Samoflavlova
It was not something that Russia did that led to the rise in prices for fertilizers, energy resources and grain, but it was the short-sighted policy of Western countries back in the coronavirus years, President Vladimir Putin said. How exactly did the West disperse inflation, which is now so hard to fight, and provoked a crisis?
The difficult situation in the global food and energy markets did not arise today, the Russian President Vladimir Putin said. He recalled that the short-sighted policies of Western countries led to an increase in prices for fertilizers, resources and grain back in the coronavirus years. The US and EU have turned the markets around with the massive issuance of money.
“They printed money in a very large volumes, bought food in the world markets. As a result, prices immediately skyrocketed,” Putin explained. The events in Ukraine, to a certain extent, only stimulated processes that had already begun. But it was not we who provoked the crisis, but the West, the president added.
“The cause of the energy crisis, of course, was not in Russia. And it did not begin with the beginning of the NWO, and not in 2022 at all, but earlier. Europeans have already gone through the winter of 2021-2022 with prices above $1,000 per thousand cubic meters. These were historical records for them then. And the price of gas began to rise in the second half of 2021, when the consumption of any energy began to recover after the “covid”. Then there was not enough gas, so prices began to go up,” recalls Igor Yushkov.
Why did gas become scarce back in 2021? “Simply because prior to this, there had not been sufficient investment in new projects for years. It was expected that the consumption of traditional energy would decline at a fairly large pace, this was spelled out in the EU decarbonization program. During Covid, climate optimism reigned in the West. Everyone said that after Covid, the world would immediately go carbon-free. However, in reality it turned out to be the opposite. Consumption not only did not decrease, but began to grow after the “covid,” says the FNEB expert.
It is indicative how BP was fundamentally wrong in its forecasts due to the massive climate issue. She assured that in 2019-2020 there was an oil peak, and the world will never consume so much oil again. In the spring of 2020, since the beginning of the epidemic and quarantine around the world, oil prices fell to record lows of $40 per barrel, and at times even reached negative values.
However, after the “covid” the world did not turn upside down, and people did not switch completely to electric vehicles. The demand for energy not only recovered, but also went up. In Europe, the gas crisis has also worsened because of the weather. The summer was hot, dry, which stopped hydroelectric and even nuclear power plants. The wind also failed, because at the end of the summer and then in the autumn there was no wind for weeks. And it took more gas to replace all those lost sources of electricity.
“The energy crisis is a banal lack of energy that has given rise to high prices. In 2022, the gas massacre began, gas Darwinism, when the one who is stronger and richer gets the gas, ”
Yushkov says. He recalls the story of how a gas trader broke off a contract with poor Pakistan, refused to supply LNG to it, because he decided to make money by reselling this gas to Europe at crazy prices. This worked out much more profitable even with the payment of a penalty to Pakistan for breaking the contract.
“It even came to outright robbery when Germany arrested Gazprom Germania, which had a contract with Yamal LNG to supply LNG to India. However, Berlin, having arrested a subsidiary of Gazprom, refused to supply this LNG to India, but delivered it to Europe, because you can earn more there. And India was left without gas. That is, the Europeans deprived those who were weaker of energy resources. And Europe is still lucky that China was “sitting” on coronavirus restrictions and did not compete with the Europeans for LNG supplies, otherwise it would have been even worse,” says Igor Yushkov.
A similar situation was with masks, gloves and vaccines during the pandemic, when planes stopped for refueling and took these goods. “This year the gas market in the EU has stabilized due to the fact that the winter was warm. And most importantly, the volume of gas consumption has fallen sharply due to the banal deindustrialization of industry. The volume of gas consumption in the European Union fell by 60 billion cubic meters in 2022, as prices were too high,” concludes Yushkov. And this year, the recovery of the industry is not observed.
Approximately the same situation arose with food. The West, which is stronger and richer, during the pandemic began, on the one hand, to buy food in reserve, and on the other hand, “locked” its products at home. Food has become a scarce commodity, and high demand has driven prices up. Further, the rise in the cost of energy began to be relayed to the cost of food. This happens naturally, since the same gasoline is needed during agricultural work and for the transportation of any goods, and gas is needed not only for light and heat, but also for the production of fertilizers.
“The West itself provoked problems with inflation long before the situation in Ukraine. Even during the coronavirus, logistics chains were broken, the West refused food supplies. And now a number of European countries are complaining about grain overstocking.
For example, in Poland, prices collapsed after the influx of cheap Ukrainian grain and the filling of storage facilities even before the new harvest, which simply “screws” Polish farmers into bankruptcy. The rejection of the grain deal is an attempt to “write off” food inflation to grain. But do not forget that only 11 million tons of wheat (slightly more than 4% of the world demand) were not delivered, with prices rising by 21-27%,” says Olga Lebedinskaya, Associate Professor of the Department of Statistics of the Russian University of Economics. Plekhanov.
The West has achieved its goal - it has severed Russia's economic and energy ties with the European Union. For which the EU had to pay dearly. “The United States and Canada, having removed Russia from competitors in the European market, are turning into almost monopolists. Taking into account the fact that logistics from the USA and Europe are much more expensive than from Russia, the price increase was predetermined,” concludes Lebedinskaya.
And now for the second year the US and the EU are struggling with record inflation. The only way is to raise the rate. The Fed and the ECB took advantage of it again. As a result, the Fed has raised rates 11 times since March 2022, and this week raised the rate to a maximum in more than 22 years. Many experts believe that the American regulator will end here, and some do not think so.
And Fed Chairman Jerome Powell himself is not sure that inflation has already been defeated, although the latest statistics show it is slowing down. What is the danger of further rate hikes by the US Federal Reserve? This could lead to more bankruptcies in US regional banks. The Americans and then the Europeans have already faced a banking crisis, which they managed to “muffle”, but how well is still a question.
“You keep squeezing and rolling the tube of toothpaste, you keep raising the stakes, and you know it's about to break, you just don't know when or where yet.
I'm just predicting - and I'm very cautious about it - that the regional banks that support 60% of the economy will collapse," Kevin Oleary, the head of the venture capital firm, told CNBC.
The ECB is clearly following the Fed's course and is raising rates at the fastest pace in history. Such high rates in the EU were also more than 20 years ago. The banking crisis in the EU erupted immediately after the problems in American banks. At the same time, the European economy is sinking deeper: it has already faced a technical recession. Therefore, Western countries are unable to fully cope with inflation, which creates a danger for the entire world economy.
This article originally appeared in Russian at vz.ru