Prof. ST Hsieh
Director, US-China Energy Industry Forum
September 26, 2022
Russia’s war on Ukraine started on February 24, 2022, military actions are still going on. Without spending any more time on how the war got started and could it be avoided, let us focus on the price tag of the war at: US$2.8 trillion! Is the war worth it? Why it costs so much?
It is easy to put all the blame on Russia for starting the war in Ukraine, but Russia so far has not fired a single shot at anyone outside Ukraine. Of course, now we are talking about a potential nuclear war. It is scary.
It appears that Europeans have caused this crisis by actively sanctioning Russia energy right after the war started. As a matter of fact, EU and Britain ineptly devised incompetent sanction measures. They backfired! Unfortunately, EU and Britain are working on more sanctions rather than trying to end the war in Ukraine.
As such, who should pay for the cost of war? It is a question that more and more Europeans and Britons will ask for accountability. They have not voted for sanctioning Russia, but they are stuck now. When the weather gets cold in Europe, more protests on the streets will demand changes of governments. Unfortunately, it will mean more instabilities and suffering without relieves.
Further, the rest of the world has to cover part of the huge cost, estimated at US$2.3 Trillions. But most of the suffering populations are “collateral damages:” they have no position or ability to affect the progress or outcome of the war in Ukraine.
The future of the world is challenged by this war!
Russia’s war on Ukraine will cost $2.8 trillion across the world – and winter energy shortages in Europe could push that figure higher, OECD says
Phil Rosen Mon, September 26, 2022 at 6:23 AM
- Russia’s invasion of Ukraine will cost $2.8 trillion in lower economic output by the end of 2023, the OECD says.
- The Paris-based group added that that amount could climb depending on how Europe’s energy crisis unfolds.
- “We are paying a very hefty price for the war,” OECD’s chief economist said, per WSJ.
Russia’s war on Ukraine will cost the world $2.8 trillion, and that figure could go higher if Europe’s energy crisis worsens to the point of rationing over the winter months, according to the Organization for Economic Cooperation and Development.
Since the invasion in February, the conflict has become the worst that’s been seen in Europe since World War II, and the ensuing surge in natural gas and power prices have rattled economies and strained global supply chains.
“We are paying a very hefty price for the war,” Álvaro Santos Pereira, OECD’s acting chief economist, said, per the Wall Street Journal.
The OECD forecasted Monday that the world economy would grow by 3% in 2022, and 2.2% in 2023. That’s a revised forecast, down from 4.5% and 3.2% for this and next year, respectively.
In the Eurozone specifically, the OECD’s June forecast was a 1.6% growth in 2023. Monday’s revision dropped that down to 0.3%.
In Germany, Europe’s largest economy, the figure revised from 1.7% growth to a 0.7% contraction.
And all these figures could worsen if a severe winter exacerbates Europe’s energy crisis, the Paris-based economic group said. A rise in energy prices would weigh on Europe’s economic output so that it would be 1.3% lower in 2023, with the world economy growing at a 1.7% clip.
An energy shortage across Europe could prompt a rationing of supplies is winter is particularly harsh. That risk could be somewhat minimized, the OECD said, if energy consumption was slashed by up to 15%.
And while price caps can help ease short-term pressure on households, Pereira noted, it can worsen consumption measures.
“If you want to save energy, higher prices mean less consumption,” he said, per the Journal.
Meanwhile, Germany signed a natural gas deal with the UAE on Sunday, marking another move by a European country to secure additional energy supplies ahead of winter.
“This marks an important milestone in building up an LNG supply infrastructure in Germany and setting up a more diversified gas supply,” Germany utility giant RWE said about the agreement.
World economy to slow, ‘paying the price of war’: OECD
Ali BEKHTAOUI Mon, September 26, 2022 at 1:41 AM
The world economy will take a bigger hit than previously forecast next year due to the effects of Russia’s war in Ukraine, the OECD said Monday.
In a bleak report titled “paying the price of war”, the Paris-based organisation noted that the conflict aggravated inflationary pressure when the cost of living was already rising quickly.
Covid outbreaks are still having an impact on the global economy while growth has also been affected by rising interest rates as central banks scramble to cool red-hot prices, the OECD said.
“A number of indicators have taken a turn for the worse, and the global growth outlook has darkened,” the Organisation for Economic Co-operation and Development said in the report.
– German recession –
The outlook for nearly all nations in the Group of 20 top economies was cut, except for Turkey, Indonesia and Britain, though the latter is forecast to have zero growth.
Growth in the United States — the world’s biggest economy — is forecast to slow to 0.5 percent in 2023.
The growth forecast for China, whose economy has been hit by strict Covid lockdowns, was cut sharply for this year to 3.2 percent while it was slightly lower to 4.7 percent for 2023.
Germany is now expected to go into recession next year with Europe’s biggest economy now seen shrinking by 0.7 percent — a 2.4-percentage-point drop from the previous forecast.
The eurozone as a whole will post meagre growth of 0.3 percent, a sharp downgrade from 1.6 percent.
The OECD kept its 2022 global growth forecast unchanged at three percent after previously lowering it.
To highlight the impact of Russia’s invasion of Ukraine, the OECD said global output in 2023 is now projected to be $2.8 trillion lower than previously estimated before the conflict in December 2021.
– ‘Significant uncertainty’ –
The war has sent energy and food prices soaring over concerns about supply as Russia is a major oil and gas producer while Ukraine is a key exporter of grains to countries across the world.
Inflation had already been on the rise before the conflict due to bottlenecks in the global supply chain after countries emerged from Covid lockdowns.
“The effects of the war and the continuing impacts of Covid-19 outbreaks in some parts of the world have dented growth and put additional upward pressure on prices,” the OECD said.
“Inflationary pressures have become increasingly broad-based, with higher energy, transportation and other costs being passed through into prices,” it said.
The OECD raised its inflation forecast for the G20 to 8.2 percent for 2022 and 6.6 percent for next year.
Governments have announced emergency measures to help households and businesses cope with the soaring cost of living.
But the fiscal measures to offset energy costs “have been poorly targeted”, the OECD said.
Central banks, meanwhile, have ramped up interest rates, a move necessary to tame inflation but that can also push economies into recession.
The organisation warned that “significant uncertainty surrounds the projections” for the global economy.