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FX.co ★ Has the gas war between Europe and the Russian Federation started?

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Forex Analysis:::2022-03-30T05:04:28

Has the gas war between Europe and the Russian Federation started?

Has the gas war between Europe and the Russian Federation started?

Although yesterday can be called "important" from the point of view of establishing peace in Eastern Europe, the problems that arose after the start of the special operation will be solved by the world for a very long time. At the moment, the most significant "results" should be highlighted.

So:

1) Many cities and villages of Ukraine have been destroyed. This means that now, at someone's expense, all the destruction must be restored. The special operation dealt a significant blow to the economy of Ukraine. Recovery can take years.

2) Russia found itself in sanctions "blockade". In just a month of military operations against the Russian Federation, more than 6,000 sanctions were imposed. It is unknown when they will be removed/canceled/weakened. For example, yesterday, British Prime Minister Boris Johnson said that even a cease-fire and the withdrawal of troops from the territory of Ukraine would not be a reason to lift sanctions. He and US President Joe Biden advocate further pressure on Moscow. Thus, the Russian economy may also be in a deplorable situation for years.

3) Europe and the Russian Federation began to conflict over gas supplies. At first, Brussels has stated several times that it will reduce gas purchases in Russia by 2/3 already this year. Then, over the next year, it may completely abandon Russian gas. US President Joe Biden assured Europe that it will not remain without gas, the States will increase LNG production and begin exporting it to the European Union. After that, Russian President Vladimir Putin said that in response to the unfriendly actions of Western countries, Russia will accept payment for energy only in rubles. The EU leaders immediately replied that they were not going to buy rubles for payment because the payment currencies are spelled out in gas and oil contracts. Further, Vladimir Putin said that in this case, Moscow may stop supplying gas to Europe altogether. And yesterday it became known that gas flows through the Yamal-Europe pipeline fell to zero.

4) Oil embargo. We should also not forget that many EU countries support the rejection of purchases of Russian oil. This issue is much easier to solve than with gas since there are plenty of countries in the world that have huge oil reserves. However, sanctions will have to be lifted from Venezuela and Iran, as well as an agreement with the Saudis to increase production volumes. However, these are not as unsolvable issues, as they may seem at first glance. Thus, the Russian Federation may find itself under "oil sanctions" in the coming years.

All of the above points are in any case blows to the global economy. Oil and gas have already soared into the sky and are not going to fall yet. The more the situation with the distribution, import/export of hydrocarbons deteriorates, the more they can increase in price. And rising energy prices are new grounds for rising inflation around the world.

Analyst InstaForex
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