'Inflation woes' for Europe as Russia seizes nuclear plant
04 March 2022
Dr Jorge Guira, a finance and energy transition expert in the School of Law at the University of Reading, said:
“In the fallout from Russia’s attack and capture of a Ukrainian nuclear power plant there are further implications for an already volatile energy and financial market.
"Energy is one of the biggest trading commodities, and this is going to have deeper effects as we see equity markets fall, commodities rise, and supply chain, bonds and inflation woes likely increase.
“Stacked against the cost of human lives it might seem irrelevant, but the potential shock of the invasion could lead to long-term economic attrition, pressuring banks and financial systems across or linked to Europe.
“One of the immediate impacts may be to put further pressure on gas prices, as the EU and US consider related oil sanctions. Putin may well have one eye on the financial opportunity. He can possibly have agents effectively trade on superior information in financial markets, despite or indeed because of sanctions.
“Financial trading could provide profits even if physical delivery is more limited for commodities. Shadow banking may also allow billions if not trillions to be accessed through various means including cryptocurrency, which has risen on the back of upheaval, sanctions, and rouble devaluation. It remains largely to somewhat unregulated in decentralised Crypto exchanges, and it remains to be seen how effective is regulatory oversight and sanctions proof in centralised exchanges.
“Biden is now considering a bipartisan bill to cut off Russian energy to the US. EU leaders are meeting in Brussels to do the same. The US and Qatar can provide much more expensive liquefied natural gas, but European port capacity is a concern.”