Key Takeaways:
- Amid the continuing war in Ukraine, the world could see increased inflation and energy crisis
- Russia faces strong sanctions by the Western Powers for its unprovoked attack on Ukraine
- Russia’s state-controlled gas company, Gazprom, announced it is shutting off the natural gas supply to Poland and Bulgaria
YEREVAN (CoinChapter.com) – Inflation, energy crisis, and supply deficits are making global headlines. As the Russian invasion of Ukraine enters its third month, the world finds itself in a difficult position. On the one hand, the western powers, led by the United States, are imposing tough sanctions on Russia. On the other hand, Europe’s energy dependency on Moscow for oil and gas has left them with economic consequences. In a recent aggressive move, the Kremlin has decided to cut gas supplies to two European nations, Poland and Bulgaria.
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First came the pandemic, now the war. Inflation could linger on.
The persisting lockdowns in major cities in China amid fears of the renewed pandemic have disrupted global supply chains. As a result, the increasing prices of goods and services have rendered governments and central banks helpless against inflation.
The continuous increase in demand and the acute supply shortages are pushing the cost of commodities to recent highs. The US Federal Reserve pumping money into the economy (quantitative easing) is making matters worse.
The increasing price of oil, which fuels almost every sector of the global economy, has the economists worried. As the war raged on, oil prices jumped to $139 a barrel at one point, a 14-year high.
The United States banned imports of Russian oil, costing citizens a pretty penny at the pump. Meanwhile, the otherwise politically united Europe is divided on the issue. Fearing devastating consequences, some countries are reluctant to deprive themselves of Moscow’s oil.
“The question is: If we ban oil, will it hit Russia or EU economies harder? Russia is selling oil to other countries and will get money that way,”
Politico quoted a senior Central European diplomat saying.
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Russia hits back, turns the tap off on Poland and Bulgaria
Russian President Vladimir Putin has long supported an offensive position when it comes to dealing with his adversaries. In February, Germany halted the Nord Stream 2 Baltic Sea gas pipeline project. The pipeline would have doubled the flow of Russian gas to Germany. Undeterred, Moscow announced it would offer its gas to other nations at a discount.
India scorned warnings from the USA and announced it will buy more Russian oil. China, on the other hand, struck a new oil and gas deal with the Kremlin worth $117.5 billion. In addition, Russia demanded countries pay for its oil and gas in its currency, the Ruble, instead of USD.
Earlier today Russia’s state-controlled gas company, Gazprom, announced it is shutting off the natural gas supply to Poland and Bulgaria. The two European countries had refused to replace the greenback with the Ruble. The Kremlin further warned other countries would face a similar fate if they refused to pay in its currency.
Inflation-hit Europe hits back
European Union officials have termed Russia’s actions against Poland and Bulgaria as “blackmail.”
“The announcement by Gazprom that it is unilaterally stopping delivery of gas to customers in Europe is yet another attempt by Russia to use gas as an instrument of blackmail…This is unjustified and unacceptable,”
European Commission President Ursula von der Leyen said in a statement.
In a show of solidarity, countries promised to use their oil and gas reserves to help their neighbors. However, as the crisis deepens, Kremlin could turn the tap off on other countries in the region as well.
However, Hungary, a major European country, has agreed to pay for Russian oil and gas in the Ruble instead of the USD. The news shows Europe is not as united as it claims to be.
Meanwhile, Federal Reserve Chairman Jerome Powell said the Central Bank could raise interest rates by .5% in May. However, with no end to the war in sight, the world could experience a prolonged crisis as gas supply issues continue to fuel inflations.
Can cryptocurrencies like Bitcoin (BTC) attract new users in inflation-hit economies as a result? Time will tell.
