I think that the unexpected outcome of the Ukraine conflict so far has been how it is affecting the Russian economy. The value of the ruble has already declined, suggesting that we could see a serious impact on investments in Russia. European banks could be getting nervous, which will have a definite impact on capital flow into Russia. Right now, it looks like the Russian economy could be hit harder than Ukraine if this conflict continues.
About 15 percent of Europe’s natural gas flows through Ukraine pipelines, so the potential impact of interruptions or stoppages via Ukrainian pipelines is more limited now than it once was. That said, European investors still have good incentive to help restore old pipelines to ensure the continued supply of Russian oil and gas.
Actually, because of the timing of this conflict with Ukraine, Europe is somewhat protected from any serious economic or fuel price impact. We’re at the end of winter, so demand is falling, and many European countries have worked at improving their reserves. Prices have already gone up, yes, but the supplies are there. You’ll always see prices go up in response to news like the conflict in Ukraine, but that’s a market response, not linked to actual supply and demand.
Article Author: Chris Faulkner