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Mission Impossible: to Throw Russia Out of the Global Economy, - Oleksiy Kushch



Withdrawing Russia from the global economy is an unrealistic prospect. But severing Russia's ties with Western countries is quite possible. Oleksiy Kushch, an expert at the United Ukraine Analytical Center, writes about this in his article for The Gaze. The text of the article can be found below.


It is too big to get rid of and too aggressive to allow it to develop. This is roughly the consensus that is now emerging in the West about Russia. And Ukraine's foreign policy should take these realities into account. Currently, the cluster with the largest excess of energy consumption over production in the structure of the regional energy balance is Asia: 1890 Mtoe (conventional megatons of oil equivalent). Europe ranks second with 835 Mtoe. In total, these two megaclusters need to import 2725 Mtoe. Who can supply them?


There is little hope for the Pacific region, Africa and Latin America. They have free volumes of 296, 209, and 49 Mtoe, respectively. Among the largest suppliers are only the Middle East (1127 Mtoe) and the CIS countries (789 Mtoe, mainly Russia and Kazakhstan).


In total, these two energy regions can provide almost 2000 Mtoe, which means that this volume does not yet cover the needs of the EU and Asia. The potential of North America (322 Mtoe) only partially amortizes the problem, but does not solve it (Canada's contribution is 245 Mtoe and the United States' 78 Mtoe).


By the way, these figures clearly demonstrate the failure of the theory that the current energy crisis in the EU is allegedly a plot by the United States to oust Russia from the energy market as its main competitor.


As we can see, the United States does not currently have the necessary volumes of free energy for the EU. Involvement of Iran through the signing of the so-called "Iranian dossier or agreement" between this country, the EU and the US could reduce the deficit by 78 Mtoe. Norway (185 Mtoe) is currently Europe's key domestic energy source.


Theoretically, all the free resources of Australia, Canada, the United States, Iran, Algeria, and Nigeria could be redirected to Europe. We will get a total of 855 Mtoe. These volumes cover the needs of Europe, but expose the deficit in Asia, whose markets are supplied by Canada, Australia, and partially the United States.

And this does not take into account the fact that the oil supply will be accompanied by a shortage of coal, uranium, or natural gas.


The Volume of the Russian "Gas Station"

As for Russia, it currently has an energy surplus comparable to the deficits of both China and Europe. It is noteworthy that both Europe and China have an almost identical level of deficit of just over 800 Mtoe. The Russian energy surplus is 682 Mtoe.


Currently, the world's oil and biomass reserves are in deficit. The surplus is in oil products, natural gas, and coal. However, given the current dynamics, gas reserves may soon go into deep negative territory.


It is this palette of energy shortages that paints the globe in the colors of neutrality, covert support for Russia, or lukewarm assistance to Ukraine.


First of all, it is China and India (covert support). In the second place - Turkey, Thailand (neutrality). And thirdly, Germany, France, Spain, and Italy (restrained support for Ukraine). But South Korea, Taiwan, Japan, and the United Kingdom are guaranteed energy supplies from the United States, Canada, and Australia, and their dependence on Russian supplies can be relatively easily diversified.


New Approaches

Europe cannot quickly throw Russia out of the structure of its energy balance. In fact, we have witnessed the "tearing out with the meat" of the model of interaction between Europe and Russia, formed half a century ago.


This dependence is currently breaking down, but the process will take time to complete as the EU implements the so-called "green transition" and alternative energy sources emerge. Although Russia is currently blocking Nord Stream 1 under the pretext of repair in order to blackmail it and could provoke a recession in the EU with a 4% drop in GDP. In this case, it will be similar to a covid epidemic for Europeans, given the parameters of potential losses in the economy.


In these circumstances, Ukraine needs to maintain a sense of tact toward Europeans, without abusing their faith in the value and practical usefulness of the good for the giver. Otherwise, the political vector in the EU could lurch to the right (France and Le Pen) or to the left (Germany and Italy). And then supporters of Russia and Putin, such as Hungarian Prime Minister Viktor Orban, will join the ranks of European politicians. The crisis in the EU is also a crisis in European assistance to Ukraine.


Ukraine can contribute to the EU's energy balance by increasing its gas production, modernizing its energy sector, and becoming a leader in exporting bioethanol rather than corn and biodiesel rather than rapeseed.


Withdrawing Russia from the global economy is an unrealistic prospect. The energy imbalance in Asia will continue to create loopholes for circumventing sanctions for a long time to come. Not to mention the agricultural component. But the severance of Russia's ties with the West is quite possible.


***

But what can be done to reduce Russia's revenues? The idea of introducing a sales tax on Russian oil and gas, as well as the maximum price model, is difficult to implement - it requires regulatory influence on a large number of markets. However, it would be possible to introduce a definition of the Russian oil and gas footprint in goods (e.g., Chinese and Indian) sold in the US and EU markets. Similar to the carbon footprint tax program under the EU's Green Deal. For example, $30 per conventional ton of oil equivalent (and the money should be transferred to a special fund for the restoration of Ukraine). It is very easy to implement and destroys the interest of the Chinese and Indians in buying Russian oil and gas...


It is clear that this will require an early transition to renewable energy sources, development of nuclear energy, increase in production where possible, and energy efficiency.


Source: "The Gaze"

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