/ world today news/ It was not Russia that led to the increase in the price of fertilizers, energy resources and grain, but the short-sighted policy of Western countries in the years of the coronavirus, said President Vladimir Putin. How exactly did the West drive the inflation so difficult to reverse and provoke a crisis?
The difficult situation in the global food and energy markets did not arise today, Russian President Vladimir Putin said. He recalled that the short-sighted policy of Western countries led to an increase in the prices of fertilizers, resources and grain even in the years of the coronavirus. The US and the EU confused the markets by issuing money.
“They printed money in very large quantities, bought food in world markets. As a result, prices skyrocketed,” Putin explained. The events in Ukraine to a certain extent only stimulated already started processes. But it was not us who provoked the crisis, but the West, the president added.
“The cause of the energy crisis, of course, is not in Russia. And it didn’t start with the beginning of World War II, and not at all in 2022, but earlier. The Europeans have already gone through the winter of 2021-2022 with prices above $1,000 per thousand cubic meters. These were historic records for them back then. And the price of gas started to rise in the second half of 2021 when the consumption of all energy started to recover after covid. Then there was not enough gas, so the prices started to rise,” recalls Igor Yushkov.
Why did gas become scarce in 2021? “Simply because before that there was not enough investment in new projects for years. It was expected that the consumption of traditional energy would decrease at a rather large rate, this was spelled out in the EU’s decarbonisation programme. During the pandemic, climate optimism reigned supreme in the West. Everyone said that after COVID-19, the world would immediately become carbon free. In reality, however, it turned out to be just the opposite. Not only did consumption not decrease, but it started to grow after that,” says the FNEB expert.
It is significant how “British Petromium” was fundamentally wrong in its forecasts because of the large-scale climate problem. The firm assured that 2019-2020 was peak oil and the world will never consume that much oil again. In the spring of 2020, since the beginning of the epidemic and the quarantine around the world, oil prices have fallen to record lows of $40 per barrel, and at times even reached a negative value.
However, after the Pandemic, the world did not turn upside down and switch completely to electric vehicles. Energy demand has not only recovered, it has risen. In Europe, the gas crisis has also been worsened by the weather. The summer was hot, dry, which stopped the HPP and even the NPP. The winds didn’t make it either, because there was no wind for weeks at the end of the summer and then in the fall. And more gas was needed to replace all those lost sources of electricity.
“The energy crisis is a banal lack of energy that has led to high prices. In 2022, the gas massacre began, gas Darwinism, when the one who is stronger and richer gets the gas, ”says Yushkov. He recalls the story of how a gas trader broke a contract with poor Pakistan, refused to supply him with liquefied natural gas, because he decided to make money by reselling this gas in Europe at crazy prices. This turned out to be much more profitable even with the payment of a penalty to Pakistan for breaching the treaty.
“There was even an outright robbery when Germany arrested Gazprom-Germany, which had a contract with Yamal LNG for supply to India. But Berlin, after arresting Gazprom’s subsidiary company, refused to deliver this LNG to India, and delivered it to Europe, because here you can earn more. And India ran out of gas. That is, the Europeans deprived the weaker of energy resources. And Europe is still lucky that China “sat” on the coronavirus restrictions and did not compete with the Europeans for supplies of liquefied natural gas, otherwise it would have been even worse,” says Igor Yushkov.
It was similar to the situation with masks, gloves and vaccines during the pandemic, when planes stopped to refuel and had these items taken from them. “This year the gas market in the EU stabilized due to the fact that the winter was warm. And most importantly, the volume of gas consumption has sharply decreased due to banal deindustrialization. The volume of gas consumption in the European Union has fallen by 60 billion cubic meters in 2022 because prices were too high,” Yushkov concludes. 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, “closed” its products at home. Food became a scarce commodity and high demand drove up prices. Further, the rise in the price of energy began to be passed on to the price of food. This happens naturally, since the same gasoline is needed during agricultural work and for the transportation of all kinds of goods, and gas is needed not only for light and heat, but also for the production of fertilizers.
“The West itself caused problems with inflation long before the situation in Ukraine. During the coronavirus, logistics chains were disrupted, 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 Ukrainian grain and the filling of warehouses even before the new harvest, which simply hit Polish farmers to the point of bankruptcy. Rejecting the grain deal is an attempt to “write off” food inflation on grain. But don’t forget that only 11 million tons of wheat (slightly more than 4% of world demand) were not delivered, and prices rose by 21-27%,” says Olga Lebedinskaya, Associate Professor of the Department of Statistics of Plekhanov State University.
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 USA and Canada, having displaced Russia from competitors on the European market, are becoming almost monopolists. Given the fact that logistics from the US and Europe is much more expensive than from Russia, the price increase was predetermined,” concludes Lebedinskaya.
And for the second year already, the US and the EU are struggling with record inflation. The only way is to raise the prime rate. The Federal Reserve and the ECB once again took advantage of this. As a result, the Fed has raised rates 11 times since March 2022, and this week raised rates to a more than 22-year high. Many experts believe that the US regulator will end there, 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 that it is slowing down. What is the danger of further interest rate hikes by the US Fed? This could lead to more regional bank failures in the US. The Americans, and then the Europeans, already faced a banking crisis, which they managed to “silence”, but it is not yet known to what extent.
“You keep squeezing and rolling the tube of toothpaste, you keep raising the stakes, and you know things are getting out of hand, but you still don’t know when or where. I’m just predicting – and I’m very cautious about it – that the regional banks that support 60% of the economy will collapse,” Kevin O’Leary, head of a US venture capital firm, told local television.
The ECB is apparently following the Federal Reserve’s course and raising interest rates at the fastest pace in history. Such high levels in the EU were also more than 20 years ago. The banking crisis in the EU erupted immediately after the problems in the American banks. At the same time, the European economy is sinking further: it is already facing a technical recession. Therefore, Western countries are unable to fully cope with inflation, which poses a danger to the entire world economy.
Translation: V. Sergeev
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