Research & Insight #11

Nord Stream. On 27 October Vladimir Putin ordered Russian gas giant Gazprom to increase gas deliveries to the European Union as soon as Russian reservoirs are filled. He instructed that Gazprom begin “gradual and planned work to increase the volumes of gas in [Gazprom’s] underground reservoirs in Europe” as soon as Russian reservoirs are filled again by November 8. One third of the gas used in Europe comes from Russia. According to Moscow, in recent years the European Union has favored purchasing on the spot market, which is subject to price fluctuation, instead of signing long-term contracts with Gazprom. While Russia says it wants to deliver more gas, it also wants to return to the practice of multi-year agreements. In this respect, Vladimir Putin said on 21 October: “What we are observing now on the energy markets is a manifestation of the very capitalism that does not work“. “As soon as difficulties arise, everyone asks for government intervention,” he said.

Climate Change. The next COP26 summit will be held in Glasgow in early November. Discussions will focus on the speed of the energy transition, i.e., the transition from an economy based on fossil fuels (oil, gas, coal) to green energy (wind, solar, biomass, hydro). Despite the opposition of countries like Australia, it now seems clear that the end of coal use is an explicit objective, to be achieved by 2050. On the other hand, we are witnessing a “comeback” of nuclear energy, recently promoted by Paris and even Tokyo. Nuclear energy is increasingly seen as a way to avoid greenhouse gas emissions, while waiting for more renewable energy to be used. The French president announced in early October the investment of one billion euros in small, state-of-the-art power plants, while the United Kingdom, Russia, India and China also have plans to build or reactivate nuclear power plants.

Covid-19. A series of hygiene restrictions came into effect in Moscow on Thursday, October 28, in order to contain the Covid-19 epidemic that has recently accelerated in Russia. Services considered “non-essential” such as restaurants, clothing stores and gyms will remain closed until November 7. Only places selling medicine, food and basic necessities have been allowed to open, according to the mayor of Moscow. President Vladimir Putin has declared a national holiday from October 30 to November 7, in the hope of slowing down the movement of people and therefore the virus. The vaccination campaign remains laborious because of the mistrust and the wait-and-see attitude of the Russians. The total death toll has now reached more than 233,000 people, making Russia the most bereaved country in Europe. A third of the population is fully immunized, according to the specialized website Gogov. Despite the negative media coverage of Russia’s handling of the crisis, the country has fewer deaths per million people than France, the United Kingdom or the United States.

GDP. The International Monetary Fund (IMF) has improved its forecast for Russia’s GDP growth in 2021 to 4.7% from 4.4% in July, according to the October report. The organization’s experts predict a 4.9% drop in Russia’s unemployment rate in 2021, from 5.8% in 2020. The Russian economy is larger and more resilient than many people think. Analysts like to point out that Russia’s US$1.5 trillion GDP is comparable to Italy’s. It is worth noting that this amount is calculated based on market exchange rates. If purchasing power parity is considered, the figure rises to US$4.1 trillion, making Russia the second largest economy in Europe and the sixth largest in the world. This explains why, despite having a defence budget in dollars that is more than ten times smaller than that of the United States, the country is able to compete in some areas with the most advanced weapons.

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