GT Voice: Russia-Ukraine conflict forebodes heavy loss for Europe
Published: Feb 24, 2022 08:46 PM
This file picture posted on the website of Russian energy giant Gazprom shows Nord Stream 2 pipe-laying operations in German territorial waters.(Photo: Xinhua)

This file picture posted on the website of Russian energy giant Gazprom shows Nord Stream 2 pipe-laying operations in German territorial waters.(Photo: Xinhua)

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The situation in Ukraine is changing faster than expected. Russian President Vladimir Putin on Thursday authorized "a special military operation" in the Donbass region.

The development on the ground in Ukraine will have far-reaching political and economic consequences in Europe. No matter how some European countries like France and Germany want to pursue political independence for the EU, it is likely that they will have to follow the US-led NATO after the Russia-Ukraine tussle has evolved to a military conflict.

Also, a conflict on the European continent will undoubtedly deal a blow to European economy, which has displayed signs of recovery from the pandemic since the beginning of the year. The escalation of the conflict in Ukraine would easily derail the recovery.
Since some EU countries have long maintained close economic and trade ties with Russia, it is conceivable that the US and its allies' severe sanctions imposed on Russia will produce shocks to regional supply chains, including energy supplies. Russia has been an important supplier of oil and natural gas to many European countries. 

And the conflict will bring a string of unexpected consequences. One of the direct impacts of the military conflict in Europe will be capital outflow from the European markets to the US, which is expected to partially alleviate the pressure facing the Federal Reserve, which is mulling raising interest rates to curb surging inflation in the US. 

Meanwhile, the US-led sanctions on Russia mean that many European countries will have to rely on the expensive LNG to be provided by the US.  Of course, as oil and gas prices keep rising, inflation in European countries will be exacerbated. 

Take the Nord Stream 2 gas pipeline project, which was designed to double the gas flow capacity from Russia to Germany, as an example. The conflict in Ukraine means that it is basically impossible to push forward with the gas pipeline project, as Germany said it will put on hold certification of the pipeline. Without the Nord Stream 2, energy needs of Germany and other EU countries will be hurt. 

It seems that the US could be the only party that stands to benefit from the situation. Not only will it no longer have to worry about the operation of the Nord Stream 2 which would squeeze the market space of US LNG in European market, but it will also be able to gain an even bigger market share for its LNG that is priced at 20 to 30 percent higher compared with Russia's natural gas.

There is no denying that Germany and France had tried to ease the tensions between Russia and Ukraine through diplomatic talks, because the two countries know very well that a conflict is never in the EU's interest. 

However, the US' intensive containment on Russia by expanding the NATO to the doorstep of Russia, and Russia's determination to assure its own security, led to the military conflict. To avoid a further deterioration of the tensions there, it's time for the European countries to take into account of Russia's reasonable and legitimate security concerns, and ask Washington to change course.