May 16, 2022
The warning about an “”era of recession” in Europe” is bad news for everyone because the global economy is fully integrated with European economy. An era of recession is very depressing, depends on the length of “era.” It is common sense that this “era” of recession is caused by the Ukraine war, as of now there is no end in sight, so this “era of recession” has not started yet. Obviously, it is best to stop the war now and try to recover.
Unfortunately, EU nations are focused on punishing Russia with sanctions on the hope that Russian economy will collapse soon. But it appears that Russian and EU are racing against the clock or a game of chicken: the one can take more pains wins! It is dangerous!
Many of the issues raised here are common senses:
- Western sanctions have yet to fully deter global customers from buying Russian oil. Look at the data, EU nations are the top buyers of Russian energy, so it is a falsehood that “global customers” should be deterred from buying Russian oil.
- “The war and the European policy of sanctions given in response, has created an energy crisis.” The question begs an answer is why European is pursuing “policy of sanctions?” Is it time to take a new approach? Should European make sincere policy of stopping the Ukraine war immediately? Or is European capable of making their own policy without the guidance of US?
- The European Union’s economy will likely contract if Russian gas is cut off, EU economists say. Given the data that Russia supplies most of the gas to EU for years, should anyone have to depend on any “EU economists” for making this point? The relevant question for these economists is what EU is going to do when Russian gas is cut off?
- Now, energy has become a key problem for the EU as it seeks sanctions that deny Russia tens of billions in trade revenue without plunging member countries into recession. It is common sense that: You can’t have the cake and eat it too!
- Probably EU leaders should heed Zelensky’s command: stop Russian oil and gas, immediately. Because any company doing business with Russia has blood on their hands.
Soaring oil and gas prices help Russia more than triple its current account surplus to $96 billion, its largest in 28 years
Phil Rosen Mon, May 16, 2022, 7:49 AM
- Russia has a current account surplus of $95.8 billion in the first four months of 2022, central bank data shows.
- That’s more than triple the $27.5 billion from the same span last year.
- Russian oil export revenue is up 50% since the start of 2022, the International Energy Agency said last week.
Russia has a current account surplus of $95.8 billion so far in 2022, the central bank said, helped by surging prices for oil and gas exports paired with cratering imports amid Western sanctions.
This year’s surplus is more than triple the $27.5 billion in the same span last year and is the highest since 1994.
Western sanctions have yet to fully deter global customers from buying Russian oil. While the European Union has publicly condemned the Kremlin for its war in Ukraine, it has yet to impose an oil embargo and remains Russia’s top export market. Meanwhile, China and India have stepped up purchases of Russian oil.
Last week, the International Energy Agency said Russian oil export revenue is up 50% since the start of 2022 with the Kremlin generating close to $20 billion per month in sales.
Export volume has rebounded to levels seen before Russia invaded Ukraine. In April, Russian oil exports climbed by 620,000 barrels per day from the prior month to 8.1 million, back to their January and February average, the IEA said.
Revenue from oil and gas sales — as well as Moscow’s strict capital controls — have helped prop up Russia’s ruble, which has become the world’s top-performing currency against the dollar.
Hungary PM Orban warns of “era of recession” in Europe
Krisztina Than and Gergely Szakacs Mon, May 16, 2022, 7:36 AM
BUDAPEST (Reuters) – Hungarian Prime Minister Viktor Orban on Monday raised the spectre of an “era of recession” in Europe as the continent grapples with surging energy costs and rising inflation due to the war in Ukraine.
Orban, taking his oath of office after being elected in April for a fourth consecutive term, took a typically bullish line towards Brussels, telling parliament it was “abusing its power day by day” by pushing back member states’ sovereignty.
Nonetheless, he said Hungary’s place was in the European Union for the next decade.
He also said Hungary would not block European Union sanctions against Russia over its invasion of Ukraine as long as they posed no risk to Hungary’s energy security.
Hungary, with a few other member states, has so far rejected the EU’s proposed current sanctions on Russian oil. Budapest says it wants hundreds of millions of euros from the bloc to mitigate the cost of ditching Russian crude. The EU needs all 27 states to agree to the embargo for it to go ahead.
He said the most important task of his new government would be to steer Hungary’s economy through a European economic crisis, defending the tax breaks and benefits granted to families and defending households’ capped energy bills.
“The war and the European policy of sanctions given in response, has created an energy crisis,” Orban said.
“The energy crisis, and the interest rate hikes in the United States have jointly brought about the era of high inflation. All this will bring about the era of recession, when a decline in economic output, stagnation and years of slight increases in output will follow each other in Europe.”
Orban has repeatedly clashed with the EU over policies, most lately over LGBTQ rights and rule of law issues, but said the importance of Hungary being a member of NATO had never been as obvious as now.
He projected the war in neighbouring Ukraine would “last for a long time … and will pose a permanent security threat to Hungary“.
He said the National Bank of Hungary and the government would have to coordinate steps to curb inflation.
“We will sync these steps … we will take cautious but firm measures to regulate prices,” Orban said in a speech. His government has already capped fuel prices, basic foodstuffs and mortgage rates, as well as households’ energy bills.
Earlier in the day, the European Commission published its fresh economic forecasts, in which it said Hungary’s GDP growth would slow to 3.6% this year from 7.1% in 2021, while average inflation would come in at 9% this year.
“In 2022, the deficit is forecast to remain elevated at 6.0% of GDP, reflecting the introduction of several expansionary measures and additional spending related to high energy prices,” it added.
(Reporting by Krisztina Than and Gergely Szakacs; Editing by Alison Williams)
The EU says the bloc will likely enter a recession if Russian gas is cut off or even if supplies keep flowing and prices spike
Phil Rosen Mon, May 16, 2022, 6:38 AM
- The European Union’s economy will likely contract if Russian gas is cut off, EU economists say.
- Growth is set to slow whether or not Russian oil continues to flow into Europe, they said.
- The bloc projected lower GDP, rising prices, and strains to household income and company revenue for this and next year.
If Russian natural gas flows are to the European Union are halted, the bloc’s economy is likely to slump into a recession, officials said Monday, and nations with the heaviest reliance on those energy supplies are set to suffer the deepest consequences.
The bloc’s economists warned that, whether Moscow shuts off supplies or if an oil embargo falls into place, any halt of natural gas will likely push the EU into a recession.
“Russia’s invasion of Ukraine is causing untold suffering and destruction, but is also weighing on Europe’s economic recovery,” Paolo Gentiloni, European Commissioner for Economy, said in a Monday statement. “Other scenarios are possible under which growth may be lower and inflation higher than we are projecting today.”
The European Commission forecasted Monday that gross domestic product will climb 2.7% this year and 2.3% in 2023, lower than its previous prediction of 4% and 2.8%, respectively.
It maintained that Russia’s invasion of Ukraine would slow down growth for this year, and that companies and household spending will be hit hard by rising energy prices.
EU economists expect inflation to outpace wage rises, resulting in a 2.8% decline in real household disposable income for 2022.
Notably, they predicted that nations within the eurozone — nations heavily reliant on Russian energy and in close proximity to the war — would see consumer prices climb at an annual average rate of 6.1% in 2022, up from its prior 3.5% forecast.
So far, the Commission has proposed an embargo on Russian oil, with a plan to cut out the crude within six months. Hungary, however, has pushed back, warning it would veto the move unless it gets an exception.
“In its current form, the Brussels package cannot be supported. We cannot responsibly vote for it,” Péter Szijjártó, the Hungarian foreign minister, said in a Facebook video, according to the Financial Times.
An oil analyst previously told Insider that an oil embargo would crater Russia’s economy and send the country spiraling into a depression.
“Every single dollar a country is paying for Russian oil is funding the war [in Ukraine]. By cutting off those revenues, the goal is to ultimately cut off Russia’s ability to continue this war,” the analyst said.
EU cuts forecast for economic growth as war’s fallout widens
Mon, May 16, 2022, 3:49 AM
BRUSSELS (AP) — The European Union has slashed its forecasts for economic growth in the 27-nation bloc amid the prospect of a drawn-out Russian war in Ukraine and disruptions to energy supplies.
The EU’s gross domestic product will expand 2.7% this year and 2.3% in 2023, the bloc’s executive arm said Monday — its first economic predictions since Russia invaded Ukraine on Feb. 24.
The European Commission’s previous outlook expected growth of 4% this year and 2.8% in 2023. The EU economy expanded 5.4% last year following a deep recession prompted by the COVID-19 pandemic. GDP shrank 5.9% in 2020.
“Russia’s invasion of Ukraine has posed new challenges, just as the union had recovered from the economic impacts of the pandemic,” the commission said when releasing the forecast. “The war is exacerbating pre-existing headwinds to growth.”
The war darkened what was generally a bright economic picture for the EU. Early this year, European policymakers were counting on solid, if weaker, growth while grappling with surging inflation triggered by a global energy squeeze.
Now, energy has become a key problem for the EU as it seeks sanctions that deny Russia tens of billions in trade revenue without plunging member countries into recession. Soaring energy prices are driving record inflation, making everything from food to housing more expensive.
Russia is the EU’s top supplier of oil, natural gas and coal, accounting for around a quarter of the bloc’s total energy. EU imports of energy from Russia last year totaled 99 billion euros ($103 billion), or 62% of the bloc’s purchases of Russian goods.
An EU ban on coal from Russia is due to start in August and a voluntary effort is underway to reduce demand for Russian natural gas by two-thirds this year. A proposed oil embargo has hit roadblocks amid reservations from some landlocked countries that are highly dependent on Russian oil, such as Hungary.
All of this has left the EU scrambling to secure alternative supplies of energy in the coming months, including from fossil-fuel exporting countries such as the United States and from domestic renewable sources meant to help the bloc achieve its longer-term climate goals.