The conflict between Ukraine and Russia magnifies tension over raw materials and energy. "The post-Covid economic recovery has contributed to a rise in inflation, while stocks were not particularly exuberant” says Thierry Pouch, head of the economic studies department of the Permanent French Assembly of Chambers of Agriculture on the occasion of a hearing of the French Senate’s Economic Committee on the repercussions of the conflict.
From an economic and financial point of view, “States invested massively to overcome shocks during the crisis. With soaring prices and the secondary effects of economic sanctions on Russia, is there any leeway left?” asks the specialist, adding that the IMF is already ‘solemnly’ warning that the conflict will contribute to economic erosion and fundamentally alter the world’s economic order.
This crisis also elicits questions about our dependence on energy, especially on Russian gas. “Over the short term, we will not be able to reduce our needs by 2030. In the meantime, one can imagine turning to other suppliers, such as American shale gas or negotiating supplies from Algeria. But those reserves are finite and there are already long-term commitments with the countries of Southeast Asia", specifies the specialist.
Green Deal: time to reconsider
The question of the geopolitics of wheat is obviously on the table. Many countries are heavily dependent on wheat from the Black Sea. What role can Europe play in this context? Does Europe want and will it be able to contribute to the planet’s vital balance? Even while under the ambitious Green Deal it plans to reduce the use of plant protection products by 50% and fertilizers by 20% by the year 2030? “We should recall that all impact studies, whatever the method used, reach the same conclusion: a decline in European production and exports", points out Thierry Pouch. Although the 2022 season is more or less under way, with the exception of Spring sowing in the areas affected by the conflict, it is particularly the 2023 season which is brimming with uncertainties. Discussions revolve around bringing fallow land back into production. Should we ban biofuels which, as you may recall, were deemed responsible for starving the world in 2007-2008? “Europe is at a crossroads. Are we on a path towards postponing the ambitions of the Green Deal? The question needs to be asked and is one that will necessarily divide the agricultural world and the NGOs who fear that the Ukrainian conflict will be used as a pretext to question our ambition”, summarizes Thierry Pouch.
There was a time when globalization held promise, but the pandemic and war on Europe's doorstep require a profound review of global goals and balances. Remember that Russia and Ukraine account for 30% of the world’s wheat trade.