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Access the interactive webinar replay from S&P Global Ratings to hear its analysts and Global Chief Economist's views about the impact of the Russia-Ukraine military conflict and its ripple effect on ratings and the global economy.


Europe’s Energy Supply

Global Energy Market Interconnectedness Complicates Energy Transition: Experts

The increase in European natural gas and power prices being exacerbated by Russia's invasion of Ukraine could create a US manufacturing advantage for a couple of years if domestic power and gas prices remain lower than in Europe, experts said April 1.

To address current energy policy challenges, it is important to look at the origins because it is easy to blame current commodity price increases on Russia's actions, "but let's recall we had an electricity and natural gas crisis in Europe prior to the Russian invasion," Brenda Shaffer, senior advisor for energy at the non-profit research institute Foundation for Defense of Democracies, said during a webinar hosted by Our Energy Policy. OEP is a non-profit energy topic discussion platform.

During winter 2021, a simultaneous cold snap in Asia and Europe made LNG cargoes expensive and hard to find, "and we saw a mini energy transition from natural gas to fuel oil, diesel and coal," Shaffer said.

Although people are focusing on the Russian war in Ukraine as an oil crisis, it is as much an electricity and natural gas price crisis, hitting every market, she said. This will leave the US with a manufacturing advantage for a year or two because energy is the biggest input in that sector, and higher power and gas prices in Europe and Asia will give the US, where those prices are lower, an advantage, Shaffer added.

Energy transition considerations

Shifting the conversation to discuss the energy transition more generally, Yossie Hollander, co-founder and chairman of the Fuel Freedom Foundation, a group dedicated to ending US oil dependence, said the US made a political decision in electricity markets to dial back coal and nuclear development.

That mostly leaves gas and some renewables, "which can never sustain full 100% reliability, so we need to reopen optionality in the electricity market," Hollander said.

For example, Florida has one major natural gas pipeline and without it in a week there would be no electricity in Florida, he said.

Asked about the role of fossil fuels in the transition to cleaner energy, Shaffer said it was important to remove the binary rhetoric of renewables versus fossil fuels because the current generation of renewables works with a baseload of generally fossil fuels.

Ukraine War to Provide Impetus to Decarbonization Efforts, Says Integrity Council

The Russia-Ukraine war is having a major impact on global energy prices, underscoring the need to reduce dependence on fossil fuels and progress decarbonization, said Annette Nazareth, co-chair of the Integrity Council for the Voluntary Carbon Market.


EU Considering Removal of All Trade Barriers to Ukraine Exports

To help boost war-ravaged Ukraine's exports to the EU, the European Commission proposed April 27 to suspend for one year its import duties on all Ukrainian exports to the bloc, it said on its website.


EC President Warns Of 'High Risk' for Companies Agreeing to Russian Gas Payment Demands

European Commission President Ursula von der Leyen warned April 27 of the "high risk" to EU companies that agree to new Russian gas payment demands, which she said were in breach of EU sanctions.


EU 'Prepared' for Russian Gas Halt, Says EC President, As Prices Surge

European Commission President Ursula von der Leyen said April 27 the EU was working on a coordinated response to the cut-off of Russian gas deliveries to Bulgaria and Poland, adding that the EU was "prepared" for such a scenario as prices surged on the disruption.


European Gas Price Spikes on Report of Russian Gas Cutoff to Poland

European gas prices spiked in late trade April 26 after reports in the Polish media that Russia's Gazprom had suspended gas supplies to Poland.


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Financial Market Pressures

China and Russia Drag Global Growth to 22-Month Low, Push Price Inflation to Record High

Russia's invasion of Ukraine has caused several spill over effects, which for European economies are having an uneven impact at both the country and the subnational level. Key spill over effects are an increase in oil, gas, and electricity prices; a further boost to consumer price inflation; increased uncertainty and financial stress hindering business investment since the coronavirus disease 2019 (COVID-19) pandemic, and the gradual withdrawal of monetary policy stimulus by the European Central Bank.

Importantly, these spill over effects will have different implications for growth rates depending on the regional distribution of economic sectors far outside of Russia and Ukraine. Notably, the growth trajectory of certain economic sectors is diverging because of disruption to the supply and prices of construction and manufacturing inputs like lumber, steel, and electronic components, while an increase in migration outflows is impacting the availability of the labor force.

Due in part to significant downward revisions to the value added provided by the construction and manufacturing sectors, the largest contractions to nominal GDP growth according to our April 2022 forecast revisions are in Czechia, Italy, and Poland, where annual GDP growth has been revised down by over 4%. By contrast, improvements in agriculture and mining suggest that Turkey is now projected to experience a less severe economic contraction, with annual nominal GDP growth being revised upwards from -16.8% to -13.1%.

Uneven sub-national trajectories

Regions specialized in sectors that have been adversely impacted by Russia's invasion of Ukraine are set to face worse economic growth outlooks than what is implied by the country-level trend. While spill over effects in some cities such as Berlin or Bratislava were weaker than the country level effects, other cities were hit harder. For instance, automotive manufacturing hubs in Germany, like Ingolstadt, Munich, and Stuttgart, all saw larger downward revisions in their economic growth outlook than the national average.

Negative spill over effects are also pronounced in cities that are exposed to the real estate and construction industries, which experienced a large decline due to labour shortages, supply chain disruptions, and rising inflation. By contrast, regions based in rural areas saw that the negative spill over effects were cushioned by improvements in the agricultural and mining industries.

The Russia-Ukraine Conflict: Beyond the Nearer-Term Implications

With the invasion of Ukraine on 24 February, Europe's security environment, Ukraine and Russia's economic outlook, the stability of markets have been thrown into the air and are in the process of reshuffling.


European Banks Face Tough Choice as they weigh Russia pullback

European banks operating in Russia have to decide between two unappealing options — either make a hurried and probably costly exit that leaves international clients stranded, or stay put and deal with the complexities of international sanctions as well as the risk of a backlash at home.


Nordea Takes €600M Hit from Russia Exit, Expects No Further Direct Impact

One-off losses related to Russia drove Nordea Bank Abp's first-quarter net profit down by 66% year over year, but the bank has now taken all charges related to its exit from the country and does not expect any further direct impact on earnings, according to its CFO.


Japanese Banks Scale Back on Russia Exposure as Ukraine War Rages On

Japanese megabanks are scaling back on their exposure to Russia amid the ongoing invasion of Ukraine, allowing them to reduce provisions for possible bad loans.


Cyber Threat Grows As Russia-Ukraine Conflict Persists

As the likelihood of a prolonged stalemate in the Russia-Ukraine conflict grows, the risk of cyberattacks on financial and public institutions will increase.


The Russian invasion of Ukraine has not only initiated a global humanitarian crisis, it’s given rise to greater risk exposures in capital flows, trade and commodity markets worldwide. Our experts are sensitive to the effect of the conflict on global economies as well as its impact on our community in deep and varied ways.


China's Evolving Role

China (Mainland) May Move to Limit Impact of U.S. Financial Weapons

The weaponization of the US dollar against Russia after its invasion of Ukraine has raised expectations that Beijing will accelerate its de-dollarization efforts, to protect against similar financial sanctions that Washington could deploy against China (mainland). While the Chinese renminbi (RMB) is unlikely to dethrone the US dollar in the global financial system soon, concerns remain that the dollar's weaponization against Russia has initiated an irreversible fracturing of the global financial system that will result in two international monetary systems, one led by the United States and one by China.

Markets Brace for Oil, Gas Demand Destruction as China Pursues Zero-COVID Policy

China's ongoing COVID crisis is one of the key events driving commodity markets.

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Key China-Russia Oil and Gas Deals, Joint Projects and Energy Investments

Energy supply diversification to China has been at the core of Russia's eastern pivot, while Russian gas is central to China's energy diversification away from the Middle East and Australia.


Low-Priced Russian Urals Crude Cargoes Attract Chinese Buyers for June Deliveries

Several Chinese state-owned refiners have returned to the Russian spot market to buy May-loading Urals crude barrels, attracted by their record discount to Dated Brent, refining sources told S&P Global Commodity Insights March 22.


Sanctions Against Russia

Manufacturers in Kazakhstan Face Logistical Struggles Amid Sanctions on Russia

Manufacturers in Kazakhstan continue to be impacted by the spillover effects of the war in Ukraine and imposition of sanctions on key trade partner Russia, according to the latest PMI survey data, but there were signs of recovery in the service sector at the start of the second quarter.

As with most economies around the world, strong inflationary pressures are a key feature of the economy at present, with the National Bank of Kazakhstan (NBK) raising interest rates to a six-year high in a bid to try and limit surging inflation.

Marginal economic growth seen in April

The Tengri Partners Kazakhstan PMI data, compiled by S&P Global, showed that output in the combined manufacturing and service sectors increased marginally in April as new orders stabilised following a decline in March amid the outbreak of war in Ukraine. That said, the overall figures masked divergent trends across the two sectors covered, with the service sector returning to growth while manufacturing remained in contraction.

Manufacturers impacted by war in Ukraine

The weakness seen in the manufacturing sector was often linked to issues around the war in Ukraine, both in terms of supply and price pressures.

Sanctions Fear Fails to Stem Russian Oil Sales as Price Discounts Lure Buyers

Russia's seaborne exports of crude oil continue to flow into world markets at post-pandemic highs as price discounts lure buyers despite the fear of wider sanctions aimed at crimping the Kremlin's cash cow, according to analysis of tanker traffic.

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Crude Supply Cuts from Russian Sanctions Just a 'Drop in the Ocean:' Vitol's Muller

Western economic and financial sanctions on Russia have reduced its crude supply by an estimated 1 million b/d, a "relative drop in the ocean compared to the intended impact," the head of Vitol Asia said on May 8.

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Japan to Ban 'In Principle' Russian Oil imports Following G7 Pledge: PM

"Based on the latest G7 leaders' joint statement, we have decided to impose a ban in principle on Russian oil imports," Prime Minister Fumio Kishida told reporters.


Risks of U.S. Secondary Sanctions on Russian Oil Buyers Rise as EU Ponders Embargo

Risks are rising that the U.S. will impose secondary sanctions on Russian oil customers as G7 partners, including the EU, expand their commitments to curb flows, analysts said May 5.


In response to Russia’s invasion of Ukraine, S&P Global Ratings continues to assess the effect on economies, markets, and credit.


Effects on Oil

How Much Russian Oil Does Europe Import?

Russia's war on Ukraine has already displaced more than 2 million b/d from the world's second-biggest crude exporter, according to S&P Global Commodity Insights, as both sanctions and boycotts hit flows.

Lured by Cheap Oil, India Becomes Largest Customer of Russian Urals Crude

India emerged as the largest buyer of Russian Urals crude in April enticed by hefty discounts, as several of the grade's regular European customers have boycotted this oil following Russia's invasion of Ukraine.


OPEC+ Set to Stay the Course as it Awaits Clarity on Russia Shut-Ins, China Lockdowns

Dated Brent prices in April vacillated between $98/b-$108/b, as traders struggled to weigh the evolving western sanctions on Russia against weakening oil demand in China, where the coronavirus is resurgent.


South Korea on Course to Slash Russian Crude Imports, Takes Ample U.S. Cargoes as Alternative

South Korea is on course to sharply reduce crude imports from Russia with shipments from the OPEC+ producer tumbling by more than 40% year on year in March, as refiners aim to avoid trade, logistics and financial complications, while light sweet U.S. crude is considered the country's best option to fill any Russian supply gaps.


For Asia-Pacific, the biggest risk of the Ukraine conflict is market volatility and higher commodity prices; emerging economies with large energy imports are most at risk.


Implications for Gas

Ukraine's Gas Grid Operator to Suspend Russian Gas Flows via Sokhranivka

Ukraine's state-owned gas grid operator GTSOU said May 10 it had declared force majeure on the transit of Russian gas entering the Ukrainian system at Sokhranivka and would not accept gas at the entry point from May 11.

The force majeure declaration, the first of its kind since the Russian invasion of Ukraine on Feb. 24, sent European gas prices sharply higher.

As of 1430 GMT, the TTF front-month price had jumped 8% to above Eur100/MWh ($106/MWh), according to ICE data, up from Eur93/MWh before the announcement.

According to S&P Global Commodity Insights data, the contract was last assessed by Platts at Eur93.18/MWh on May 9.

Russian Gas Flows into Europe Dip in April as Ukraine War Rumbles On

Physical Russian gas flows into Europe dropped back in April compared with the previous month, an analysis of flow data from S&P Global Commodity Insights showed May 6, but supply remained above January and February levels as the war in Ukraine rumbled on.


Russia-Ukraine War Puts LNG in the Spotlight, Cleaner Shipping Rules: SEA-LNG Chairman

The Russia-Ukraine crisis has highlighted the importance of LNG in the global energy commodities mix, with LNG bunkering set to receive a boost from a growing ship fleet.


Japan, EU to Cooperate to Ensure LNG Supply, Reduce Reliance on Russian Energy

Japan and the EU agreed on May 12 to cooperate and help each other's security of LNG supply, and work together to reduce Europe's dependency on Russian energy supply by ensuring diversification through necessary investments.


Gazprom's Jan-April Non-CIS Gas Exports Fell 26.9% on Year

Gazprom's natural gas exports to non-CIS countries totaled 50.1 billion cubic meters in the first four months of 2022, down 26.9% on the same period in 2021, the company said in a statement May 1.


Following Russia's invasion of Ukraine, S&P Global Commodity Insights looks at the impacts on commodity and energy markets in the region and the world at large.


Impact on Metals & Chemicals

‘Interesting Times’ Likely Now the Norm for U.S. Metals Markets

Whoever first uttered the expression "May you live in interesting times" must surely have envisioned today's U.S. metals markets.

The saying — part blessing, part curse — is an apt summation of current times. From pig iron to nickel, aluminum to steel, U.S. pricing has soared once again on geopolitical events, supply chain strains, and overall uncertainty.

Just as domestic markets began to stabilize from record price increases in 2021 and the economy was coming to terms with the realities of a post-pandemic world, inflation bit hard in the first quarter of 2022, Russia invaded Ukraine and a new COVID-19 variant emerged.

The combination of factors is roiling markets. Russia and Ukraine's conflict has had the most far-reaching impact.

The two countries accounted for about 62% of American pig iron imports in 2021, and the war has removed significant supply of the key electric-arc furnace steel feedstock for U.S.-based steelmakers and global producers alike. About 70% of U.S. steelmaking is EAF based.

U.S. buyers have had to look to replace Russian and Ukrainian material since the February invasion, with Brazil picking up the bulk of that business. S&P Global Commodity Insights' Platts Brazilian pig iron export assessment nearly doubled from January to mid-March, topping $950/mt in early April.

In turn, Platts CIF New Orleans pig iron price assessment rose about 91% by mid-March — reaching $1,030/mt, the highest level since S&P Global began assessing it in January 2018. The weekly US pig iron import assessment is now down $90 from the recent peak but still elevated.

U.S. Suspends Tariffs on Steel Imports from Ukraine

The U.S. on May 9 suspended for one year its 25% Section 232 tariffs on steel imports from Ukraine, noting the importance of that industry to Ukraine's economy as the country continues to defend itself against Russia.


U.S. Steel Shifts Raw Materials, Continues U.S. Pig Iron Build Out Amid Russia-Ukraine Conflict

U.S. Steel is continuing to focus on increasing its U.S. pig iron supply, while shifting its raw materials mix domestically and in Europe amid the ongoing war in Ukraine, company executives said April 29.


Japan Companies Accelerate Move to Replace Russia Coal with Australian Supply, Others

Japanese utilities and manufacturers are stepping up efforts to seek alternative supplies to Russian coal from Australia, Indonesia and Vietnam, among others.


ArcelorMittal Cuts 2022 Global Steel Consumption Outlook Because of Ukrainian War

ArcelorMittal expects 2022 global steel consumption to contract 0%-1% as Russia's military invasion of Ukraine disrupts supply chains, stoking inflation, while China's COVID-19 lockdowns dampen economic activity, the world's second biggest steelmaker said May 5.



Food Inflation Hits All-Time High, Fuels Security Risks

Russia's war on Ukraine has pushed food and energy prices to fresh highs, triggering food security concerns and putting pressure on households worldwide.

Food supply chains are being forced to reroute at great cost as major importers of grains and oilseeds look to cover for stoppages of essential food exports from the Black Sea ports. Global food prices hit their highest level in March since 1990, when the UN's Food and Agriculture Organization started recording this data.

Historically, food inflation saps purchasing power of people and forces governments to tackle supply risks and take measures such as export restrictions, which further aggravate demand-supply imbalances. A similar situation is currently in the play.

Food prices are expected to remain elevated for multiple seasons and buyers should be prepared to pay higher prices for imports, FAO Economist Monika Tothova recently told S&P Global Commodity Insights.

Russia Lowers Export Tax on Wheat to $114.3/mt; First Cut Since March

Russia's agriculture ministry on May 6 set the variable export tax on wheat at $114.30/mt for the May 13-17 period, down $5.80 from the May 6-12 previous period, the first reduction in the export tax since March 16.


First Cargo of Ukrainian Corn Since Start of War Loaded in Romanian Port: Ukrlandfarming

The first cargo of Ukrainian corn since the Russian invasion of that country on Feb. 24 has been loaded for export in Romania, Ukrlandfarming, the company loading and selling the grain, said April 28.


Historically High Food Prices Here to Stay, Says FAO Economist

The historically high food and agriculture commodity prices are likely to sustain for multiple upcoming seasons driven by various factors.


The Big 4 of Agriculture Unlikely to Exit Russia Despite Mounting Pressure

Everything can be politicized, except food. This holds more relevance amid widespread protest and collective boycott calls against Russia's invasion of Ukraine since Feb. 24.


As the Russia-Ukraine military conflict rages on, S&P Global Market Intelligence Insights reports on how geopolitical factors and market volatility issues are affecting businesses across all industries at the local, regional, and global levels.