By Mohammad Mazhari

Europe will be more affected by high energy prices than Russia: Turkish expert

March 2, 2022 - 20:52

EHRAN – A Turkish political pundit says sanctions on Russia can hamper its economic growth but will affect Europe more than the Russian fedration.

“The growth of the Russian economy will slow down with the sanctions, but the rest of the region will be more affected by high energy prices and inflation than Russia,” Tahsin Yamak tells the Tehran Times.
Russia supplies approximately 40% of the natural gas needs of EU countries.

Following is the text of the interview:

Q: How do you see the latest developments in Ukraine? 

A: Ukraine as a sovereign country wants to become a member of a security organization, NATO. Russia is troubled with the Ukrainian government, which has moved away from its sphere of influence and is allying with the West. Russia thinks that NATO membership, and finally the possibility of NATO soldiers in Ukraine, will threaten its own security. In fact, this attitude of Russia poses serious threats not only for Ukraine but also for Europe and the countries of the former Soviet geography. Russia was implementing a similar scenario in countries such as Georgia and Moldova in the past.

 As we have seen in Crimea, it supports separatist movements in Donetsk and Luhansk - the Donbass region - where the Russian minority and Russian speakers are concentrated. The separatists, who seized the city centers of these two provinces with the support of Russia, declared their independence in May 2014 under the names of "Donetsk People's Republic" and "Luhansk People's Republic". Russia immediately recognized these two so-called republics.

 Then Russia decided to send soldiers to these regions. However, in a short time, it advanced its military operation as far as Kyiv, the capital of Ukraine. On the seventh day of Russia's military operation against Ukraine, conflict is continuing. It is not possible to talk about the significant dominance of these states yet. Because Russia is using a controlled force against Ukraine, which it sees as one of the different branches of the great Slavic nation. While all this is happening in Ukraine, the West -with the exception of England- in a weak voice condemns the Russian invasion and expresses its support for Ukraine. Over the last days, it is seen that the West has increased its reaction against Russia due to the increasing public pressure. While war is continuing, Russia and Ukraine still have not come together to start negotiation.

Q: Why do Western powers refuse to join Ukraine in the military conflict? 

A: Although Ukraine is being punished for its moves to become a part of the Western alliance, no agent of the Western alliance has any intention of fighting Russia. It is thought that such an intervention would cause a World War. U.S. President Biden also stated that the alternative other than large-scale sanctions against Russia would be to start the Third World War. We can consider the reactions to this invasion under two titles. First, heavy sanctions will be applied to Russia economically/financially. It seems likely that the assets and bank accounts of Russian oligarchs and Russian banks, known for their closeness to Putin, in Western countries will be seized. Again, removing Russia from the international payment system SWIFT will be an important sanction. With long-term planning carried out since 2015, Russia, which has large gold reserves, is in a strong position not only strategically but also economically. But the sanctions are likely to increase Russia's borrowing costs and increase inflation. The foreign debt burden of $60 billion will increase, and the ruble will likely depreciate further. The growth of the Russian economy will slow down with the sanctions, but the rest of the region will be more affected by high energy prices and inflation than Russia. Providing arms, equipment, financial and logistical support to Ukraine compose the second pillar of efforts in this direction. For example, U.S. President Joe Biden has announced that they will give 350 million dollars of military aid to Ukraine, which is struggling to repel the Russian invasion. There are also statements from other countries that the aid will continue. Despite all these, I think it is not possible to prevent the division of Ukraine into east and west.

Q: To what extent Russia will advance in Ukraine? Do you predict the collapse of the Ukrainian government? 

A: The main purpose of this move, which Russia has undertaken by anticipating all the reactions it will receive, is to make Ukraine a state under its own control. Because Russia, under the leadership of Putin, perceives NATO expansion towards Russia by taking in former USSR republics as a significant threat. For Putin, the expansion of NATO means the fragmentation of the historical and spiritual space between Russia and Ukraine. For this reason, Putin does not want a pro-Western government in Ukraine, which Russia considers part of itself. Putin believes the West is in decline and disintegration. He is concerned about the increase of China's influence in the Eurasian region. All these concerns make the occupation of Ukraine necessary and legitimate for him. The process that started with Crimea continues with the Donbass region. It does not seem that it will come to an end without taking the whole of Ukraine under its control. As I mentioned in the previous question, I think Russia will eventually achieve a victory, perhaps slower than expected. Ukraine is likely to be divided into East and West. I foresee that the eastern part under the control of Russia will join the Russian Federation in a short time. On the other hand, it is not possible to eliminate the instability in Western Ukraine in a short time. At the same time, it seems unlikely that Russia will leave the region until it gains dominance over the whole Ukraine. I think that more difficult days are ahead for the Baltic and Balkan states, to which Russia is always interested, especially Ukraine.

Q: How could the recent escalation affect the global economy and energy supply? 

A: This question will help us answer the question of why Russia invaded Ukraine now. Russia is the country with the highest natural gas reserves in the world and meets one-fifth of global production. Although it does not have such superiority in oil reserves, it meets more than 10% of global oil production. This situation causes Russia to be an important agent in the world energy market. In the early stages of the Covid-19 pandemic, energy demand had greatly decreased due to the restrictions applied around the world. By the end of 2020, the price of crude oil had dropped to $42 per barrel, the lowest level since 2015. Despite the rapid increase in oil demand during the normalization process, the price of crude oil per barrel was around 100 dollars in the days when the Russia-Ukraine crisis started, as the Organization of Petroleum Exporting Countries (OPEC) and some non-OPEC producers led by Russia did not increase their production. Europe's shift from coal to natural gas and renewable energy sources in energy production has significantly increased the region's dependence on natural gas, especially in the last 10 years. The increase in natural gas consumption was mainly achieved through imports from Russia. Currently, Russia supplies approximately 40% of the natural gas needs of EU countries. Natural gas exports from Asia to Europe decreased, as many businesses were closed during the Covid pandemic. When demand increased, Russia did not increase gas flow. This has led to a decrease in natural gas stocks across Europe. The decreasing natural gas stock has led to an increase in natural gas prices and, accordingly electricity prices. Russia wanted to invade Ukraine under these conditions. Because Putin thinks that it is not possible for European countries, which have the capacity to impose sanctions, to take such a step in the winter months when their natural gas needs are at their highest. Recent developments and statements also support this situation. It is seen that there is a clear difference between the sanctions rhetoric of Germany, which supplies 45 percent of its natural gas need from Russia, and the discourse of the UK, which supplies 3% of its natural gas from Russia. I think Europe will take this into account when designing sanctions against Russia. However, in the short and medium-term, there will be price increases in global energy markets due to supply and demand imbalances.

Q: Do you think the escalation between Russia and the West will affect the Vienna talks?

A: The Vienna agreement, which was put forward to control Iran's nuclear activities, lost much of its meaning with Trump's withdrawal in May 2018. However, with Joe Biden's victory in the 2020 presidential elections and the presidency of Ebrahim Raisi, we see that the process has been reconsidered. We can say that the 8th round negotiations held in Vienna are promising for the re-activation of the nuclear agreement and the lifting of sanctions. On the other hand, the negotiations, which were held with the participation of representatives from Russia, China, Germany, France, England, and Iran, will be affected by the Russia-Ukraine crisis. It will be difficult for other actors to accept Russia as a facilitator from now on. This situation will force Iran to have tighter and more difficult negotiations with other actors. But at this point, I think Iran has an important advantage that strengthens its hand. Iran is the second country with the most natural gas reserves in the world after Russia. Iranian gas can gain a critical position in reducing Europe's dependence on Russian gas. This could play an important role in reducing sanctions against Iran and turning the Vienna talks into a permanent agreement.
 

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