The Embassy has been witnessing an increasing number of attempts to correlate the current global energy crisis, looming food shortages and negative economic trends in the international markets with Russia’s Special Military Operation in Ukraine. Allegations that the current situation in this country is a major risk to economic recovery efforts do not correspond to reality at all.
Once again, we note that the UN warned about a risk of a global food crisis two years ago. The growth of food prices over the recent years is being driven by the fallout from the COVID-19 pandemic, the short-sighted economic and energy policies by major Western economies, trade wars, unfavourable weather conditions, the illegal unilateral restrictions imposed by the West against Russia as well as the underfunding of the agricultural sector.
The spike in food prices was recorded already in 2020 and was not a consequence of Russia’s Special Military Operation. The FAO Food Price Index (FFPI) rose by 50% between 2019 and 2022. According to stock exchange data, wheat prices rose by 25% in 2021. By February 2022, they were already 31-62% higher than the average for the previous five years. Maize prices have risen by 162% over the past two years. Rapeseed – by 175%.
The COVID-19 pandemic resulted in the severe disruption of global supply, production and logistics chains. A surge of financial injections into the EU, US and Japanese economy to boost post-pandemic recovery caused a significant increase in demand and, consequently, soaring inflation. This, in turn, triggered a rise in agricultural production costs: fuel and electricity prices rose substantially (oil prices – by more than 22% in 2020-2022, the average price of electricity in Europe reached its historic highs in March 2022 – by 350-530 % in some European countries compared to the same period in 2021). This was immediately reflected in fertilizer (carbamide and saltpeter prices skyrocketed by 3,5-4 times, others – by 2,5- 3 times) and cereal production.
The devastating effect on the global economy was compounded by the unilateral and illegitimate Western restrictive measures against Russia, including barriers on delivery of goods, payment difficulties, transaction bans, and customs problems. The EU openly declared an all-out economic and trade war against Russia – in full oblivion to Russia’s standing as a key global supplier of basic agricultural products (wheat, barley, sunflowers, mineral fertilizers and fodder crops), including to low-income countries, that are subject to risks of food shortages.
Allegations that the situation in Ukraine has led to an unprecedented rise of energy prices are misguiding. As a result of a cold winter in 2020-2021, European underground gas storage (UGS) facilities were virtually empty by spring of 2021. For a long time the EU was delaying decisions to fill its UGSs, waiting for prices to drop. However, there was no seasonal drop in gas prices due to economic and technological difficulties of US LNG producers, a number of natural factors, as well as the gradual economic recovery and the subsequently increased demand for LNG in Asia, where additional supplies became diverted.
Furthermore, EU renewable energy potential proved to be exaggerated (unfavourable weather conditions meant that wind turbines produced only half the intended energy). As a result, by mid-2021 Europe was short of gas. At the end of 2021 European UGS sites were filled at minimum level of 72% (50.44% in Austria, 54.43% in the Netherlands and 64.57% in Germany). Launching the “Nord Stream 2” pipeline could have smoothed tension in the EU gas market, however, due to pressure from the US and anti-Russian forces within the EU, the pipeline never became operational.
The spike in gas prices was also driven by the systemic strategic mistakes of the European Commission, which has pursued the irrational policy of abandoning long-term gas contracts in favour of spot contracts (in September 2021 the price per 1000 cubic meter exceeded USD 1000 and reached the record high of USD 3600 in March 2022). Meanwhile, according to experts, Russian pipeline gas in Q1 2022 would have been 40% cheaper for Europeans than spot prices. It is important to note, that, in line with the EU energy model, whatever the buying price of Russian gas, EU companies sell it to downstream to power generators and companies (and therefore to citizens) at spot prices, making super-profits. As a result, generating companies go bankrupt, energy shortages are preprogrammed, and, consequently, prices for regular consumers grow. Yet the EU authorities fail to explain this to citizens.
The fault for high energy prices also lies with the excessively liberal monetary policies of the EU and the US which have had the effect of spurring inflation and elevating commodity exchange prices.
As a result of irresponsible policies of the West, more and more countries want to be free to choose their own path of sovereign development and stand for lifting unilateral coercive measures, which can significantly downgrade the tensions around logistical and financial aspects, ensure unimpeded deliveries and reverse the economics back to seeking stability of global agricultural, energy and financial markets. Mutually respectful and constructive dialogue on problems with global ramifications is required. Otherwise, the consequences may become catastrophic for everyone.
EMBASSY OF THE RUSSIAN FEDERATION IN BOTSWANAThe Embassy has been witnessing an increasing number of attempts to correlate the current global energy crisis, looming food shortages and negative economic trends in the international markets with Russia’s Special Military Operation in Ukraine. Allegations that the current situation in this country is a major risk to economic recovery efforts do not correspond to reality at all.
Once again, we note that the UN warned about a risk of a global food crisis two years ago. The growth of food prices over the recent years is being driven by the fallout from the COVID-19 pandemic, the short-sighted economic and energy policies by major Western economies, trade wars, unfavourable weather conditions, the illegal unilateral restrictions imposed by the West against Russia as well as the underfunding of the agricultural sector.
The spike in food prices was recorded already in 2020 and was not a consequence of Russia’s Special Military Operation. The FAO Food Price Index (FFPI) rose by 50% between 2019 and 2022. According to stock exchange data, wheat prices rose by 25% in 2021. By February 2022, they were already 31-62% higher than the average for the previous five years. Maize prices have risen by 162% over the past two years. Rapeseed – by 175%.
The COVID-19 pandemic resulted in the severe disruption of global supply, production and logistics chains. A surge of financial injections into the EU, US and Japanese economy to boost post-pandemic recovery caused a significant increase in demand and, consequently, soaring inflation. This, in turn, triggered a rise in agricultural production costs: fuel and electricity prices rose substantially (oil prices – by more than 22% in 2020-2022, the average price of electricity in Europe reached its historic highs in March 2022 – by 350-530 % in some European countries compared to the same period in 2021). This was immediately reflected in fertilizer (carbamide and saltpeter prices skyrocketed by 3,5-4 times, others – by 2,5- 3 times) and cereal production.
The devastating effect on the global economy was compounded by the unilateral and illegitimate Western restrictive measures against Russia, including barriers on delivery of goods, payment difficulties, transaction bans, and customs problems. The EU openly declared an all-out economic and trade war against Russia – in full oblivion to Russia’s standing as a key global supplier of basic agricultural products (wheat, barley, sunflowers, mineral fertilizers and fodder crops), including to low-income countries, that are subject to risks of food shortages.
Allegations that the situation in Ukraine has led to an unprecedented rise of energy prices are misguiding. As a result of a cold winter in 2020-2021, European underground gas storage (UGS) facilities were virtually empty by spring of 2021. For a long time the EU was delaying decisions to fill its UGSs, waiting for prices to drop. However, there was no seasonal drop in gas prices due to economic and technological difficulties of US LNG producers, a number of natural factors, as well as the gradual economic recovery and the subsequently increased demand for LNG in Asia, where additional supplies became diverted.
Furthermore, EU renewable energy potential proved to be exaggerated (unfavourable weather conditions meant that wind turbines produced only half the intended energy). As a result, by mid-2021 Europe was short of gas. At the end of 2021 European UGS sites were filled at minimum level of 72% (50.44% in Austria, 54.43% in the Netherlands and 64.57% in Germany). Launching the “Nord Stream 2” pipeline could have smoothed tension in the EU gas market, however, due to pressure from the US and anti-Russian forces within the EU, the pipeline never became operational.
The spike in gas prices was also driven by the systemic strategic mistakes of the European Commission, which has pursued the irrational policy of abandoning long-term gas contracts in favour of spot contracts (in September 2021 the price per 1000 cubic meter exceeded USD 1000 and reached the record high of USD 3600 in March 2022). Meanwhile, according to experts, Russian pipeline gas in Q1 2022 would have been 40% cheaper for Europeans than spot prices. It is important to note, that, in line with the EU energy model, whatever the buying price of Russian gas, EU companies sell it to downstream to power generators and companies (and therefore to citizens) at spot prices, making super-profits. As a result, generating companies go bankrupt, energy shortages are preprogrammed, and, consequently, prices for regular consumers grow. Yet the EU authorities fail to explain this to citizens.
The fault for high energy prices also lies with the excessively liberal monetary policies of the EU and the US which have had the effect of spurring inflation and elevating commodity exchange prices.
As a result of irresponsible policies of the West, more and more countries want to be free to choose their own path of sovereign development and stand for lifting unilateral coercive measures, which can significantly downgrade the tensions around logistical and financial aspects, ensure unimpeded deliveries and reverse the economics back to seeking stability of global agricultural, energy and financial markets. Mutually respectful and constructive dialogue on problems with global ramifications is required. Otherwise, the consequences may become
catastrophic for everyone.
EMBASSY OF THE RUSSIAN FEDERATION IN BOTSWANA