EUROPEAN UNION (Times Media Service) – The modern economy is highly connected. In the economies of the past, where exchanges, events and rates would ripple slowly out from where they started, one could measure the effects on other regions in a matter of months or years. Not so in the modern day, when things happening across the planet can have near-instantaneous effects on markets, both domestic and abroad.
This is well-known to economists the world over. It’s not an idea foreign to even the meanest thinkers in the field, and is more of one of the foundations of economics, particularly the modern study. However, in particular, this matters for a specific situation directly relating to modern conflicts.
Resources are precious, and the more limited or controlled the resource, the more precious it is. While most would think of, perhaps, diamonds or gold or somesuch in reference to this, it is fact that nations rarely declare war over such things. However, there is a class of resources that many nation-states are far more likely to do all sorts of things in the pursuance of: energy.
Electrical production is difficult. The vast majority of methods involve spinning a generator somehow- in fact, nearly all of them do. Nuclear, coal, natural gas, wind, hydroelectric- each and every one of them use some manner of force to turn a turbine, which then produces electricity as it uses that kinetic energy to spin a generator. However, for most of these, you need fuel. Uranium needs fissile material, hydroelectric needs a river, and coal needs… well.
But how is this relevant?
The largest conflict in the world at the moment, or at least the one with the most focused attention on it, is the Ukrainian/Russian war. The fighting is consuming large amounts of fuel, but it has much larger consequences for a number of nations, particularly the EU.
The EU is one of the largest energy importers in the world. The large amount of incredibly interlaced economies between the nation-states that make up the EU mean that the market there is an incredibly good one, stable and reliable. It is, of course, also an economy that has large amounts of energy needs, ones which some nations partially base their own economies on satisfying. And there is no nation that satisfies more of it… than Russia.
With international relations between the EU and Russia rapidly disintegrating, and with the EU almost unanimously locking Russia out of SWIFT and trade in general, this means that the energy sector in particular will be affected. But, how much can relationships between a group of nations and Russia really effect the EU energy sector?
In 2019, Russia was provided the lion’s share of the EU’s imported energy. A quarter of the EU’s crude oil was from Russian fields, forty percent of their natural gas produced by Russian industry and refineries, and nearly half of their entire import of coal was sourced from Russian mines. Without a doubt, the EU’s energy production was rather predicated on Russian production. And now, with relationships worsening and trade ceasing, we are seeing why nations having some measure of energy independence is so important.
The EU will be able to source its energy from internal stockpiles and its allies…for the moment. Very rapidly, however, they will have to find trade partners that can replace their Russian sources, and there may be efforts at energy saving coming soon for citizens of the EU- just in time for Ukrainian refugees fleeing the conflict to arrive in a number of Western European nations.
At this point, no one really knows what the state of the international market is going to look like when the dust settles, but the EU will have to source its energy somewhere. And Russia will not be an option anymore.
Alexander Murphy / Tech Writer (Times Media Service)
amurphy@timesmediaservice.com
