The beginning of the end of the Russian energy dictatorship

-This dramatic attack on Ukraine will accelerate the end of the Putin regime and mobilize millions of activists around the world to end these medieval dictatorships

-Europeans will work together more systematically creating mechanisms and investing in a future where renewable energy will play the leading role

-In the short term we will all pay a very high price for the great instability of the markets and for the rise in inflation

The invasion of Ukraine by the Russian army on February 21, 2022 represents a brute act of terror by the Kremlin, which continues to use geopolitics and its gas pipelines to achieve its short-term political and economic interests. These Russian aggressions became the norm since 1999, the year Putin came to power, and have been repeated continuously against Moldova, against Ukraine, and against the Baltic countries. In most cases, President Putin achieved his political objectives by using his 4 main gas pipelines (minus Nordstream 2 which has not yet been approved by the Germans) which supply 45% of Europe’s gas. But this time the calculations of the Russian President are wrong and this devastating and ruthless disregard of sovereignty and rule of law, is going to end the Russian leader and the imperialist arrogance of the Kremlin.

This time is different

Although Europe always appears divided in energy negotiations, and in bilateral energy pacts with Russia, this massive invasion of the sovereign state of Ukraine will forever transform Europe towards a future less dependent on Russian energy supplies. The most powerful economy in Europe (Germany) is also the one that most depends on Russian gas and oil (for about 75% of its energy needs), and it is the country that, in order to protect its energy security, will expand its energy transformation towards renewable energy. This transformation will happen at an unprecedented speed as it is about “life or death” as Gallaway Insights analysts say, who also declare that “Putin’s war will change Europe’s energy network forever”. This global event will accelerate Europe’s transition to more robust energy independence and possibly strengthen the European Union’s common energy policy. On the contrary, this aggression will deprive President Putin of his most valuable exports, oil and natural gas, which correspond to approximately 70% of his total exports. Italy, Spain, and France will follow a similar path and aggressively push for total energy independence from Russia.

What will happen now? Four Scenarios

Inflation and energy cost: Inflation in the US and the EU is already at the highest level in four decades and the worsening of the crisis between Ukraine and Russia could push inflation in the US to 10%. For months, the prices of all types of energy (gasoline, diesel, natural gas, oil and more) have been a major factor behind inflation, which increased 7.5% in January in the United States and 5.2 in the European Union to the highest level since 1982. Energy costs increased by 27% in 2021 in the USA (which remains the world’s leading oil producer) and in Europe the price of natural gas grew by 600% since July 2021, in part due to an unbalanced supply and demand. Oil prices will continue to rise and could reach $110 a barrel if the crisis worsens. With oil at these prices, it is estimated that the United States (According to RMS analysis) will lose 1 percentage point of its Gross Domestic Product in 2022. Europe would lose even more since it is more dependent on foreign supply, especially Russian.

The Financial Markets: We all know that the markets do not like volatility, and since the beginning of the tensions between Russia and Ukraine in late October of 2021, the volatility in the stock markets has increased. The invasion of Ukraine will continue to trigger a sell-off in stocks, and prolonged market instability would cause many losses, especially for families and small businesses in the stock market and in their retirement accounts.

Increase in the cost of money for all: If inflation continues to grow at these rates, the North American and European central banks will increase interest rates to try to lower inflation. These interest rate hikes will increase borrowing costs for consumers on everything from mortgages and car loans to credit cards. It would also negatively affect businesses access to financing as they would not be able to pay for the increased lending rate.

Sanctions against Russia: Western sanctions against Russia materialized at extremely high rates and mark a moment of strong coordination between Western countries. Major Russian banks will be sanctioned, the new NordStream 2 pipeline that cost Russia 11 million Euros has already been blocked by the Germans, and massive restrictions on Kremlin-related Russian companies will be implemented immediately. To date, more than 800 oligarchs starting with tycoon Abramovich (the owner of the Chelsea football team) are being sanctioned due to their closeness to the Kremlin. It may also be that Russia will eventually be kicked out of the Swift, making it extremely difficult for the Russians to do business with the rest of the world.

Conclusion: Like all crises, the most vulnerable pay the highest price, in this case the ones who will pay a huge human and financial cost are the Ukrainian people who are being brutalized by the Kremlin. In economic and financial terms, this crisis affects everyone since most people will have to pay more for energy, for food, for their vacations and even for their health. But opportunities arise from all crises, and as Macchiavelli said, a good crisis should not be wasted. This medieval Russian aggression will accelerate the incentives for energy independence for Europeans, and countries like Germany and Spain that have invested heavily in their energy diversification, especially towards renewable energy will benefit the most. In addition, the Europeans are finally realizing that working together (within the European Union) give them a lot of power and leverage, especially in times of political and financial instability. Finally, what Putin does not expect is a global mobilization of people, which will start in Russia and which will take down the last Russian imperialistic leader.



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