«The incursion of the Russian army into Ukraine on February 24 forces victims, wounded and refugees to experience particularly gloomy moments. He will remind some observers of other dark pages such as the invasion of Afghanistan by the USSR in 1979 or that of Kuwait by Iraq in 1990. In both cases, the aggressor with the a priori best armaments owed to the end, beat a retreat ...
The speech of the current Russian president, full of nostalgia for the Soviet empire, coupled with his accusations against NATO, also plunges us back into an atmosphere worthy of the cold war. And, therefore, are we really “Back in the USSR”, as the Beatles sang in 1968… shortly after the Soviet repression of the “Prague Spring”?
In part, yes, in the case of the “anti-imperialist” discourse - communist rhetoric aside, which has now disappeared - and also in the case of the autocratic aspect of the regime and the censorship that rages in Russia.
However, the same cannot be said of the economic and geopolitical consequences for the rest of the world. Indeed, from an economic point of view this local conflict has more profound immediate global consequences than many Soviet conflicts of the past (with the exception of, of course, World War II) as it pushed inflation to record levels and caused prices to soar. of most raw materials. It is true that some of the conflicts of the Cold War had had significant economic repercussions and that the Vietnam War had drained the US coffers, hastening the demise of the gold standard in favor of the dollar. But that war had not had a significant impact on the supply of raw materials. The oil shock of the end of 1973, which is not directly linked to the Cold War, is the historical example that comes closest to the current picture. In just a few months, the price of oil had then quadrupled and in 1979 a second shock had nearly tripled it. The extent of the shock is certainly minor for the moment, even if the conflict is not over and is also affecting other raw materials, in particular some metals critical for the energy transition (palladium, nickel, cobalt, etc.) and agricultural raw materials. essential (wheat, corn, soy, etc.). The current shock on commodity prices is certainly more contained in this phase, albeit much more extensive, and is grafting onto an already difficult situation for some goods (automobiles, semiconductors) and sectors (for example, American real estate ).
The economic consequences of the two oil shocks of the 70s were dire as they marked the end of the economic boom. Since the last few decades have not been particularly glorious, current inflation will not put an end to an astonishing economic regime. Instead, it could mark the end of another regime: that of globally accommodative central banks - despite some very gradual rate hikes - and nominal ones that tend to decline. Once it has made its way into the economic system, inflation is not easy to fight, even more so if it is due as much to dynamic demand as to a decrease in supply, as is happening. It could take drastic hikes in policy rates to stop it, although central banks are reluctant to do so given the ensuing economic slowdown. They are certainly moving in that direction, but with evident delay and utmost caution. And so, the US official rate is still close to 0% while inflation is close to 8%. In Europe, the ECB keeps official rates in negative territory while forecasting inflation close to 5% in 2022! If inflation were to accelerate further, it would be necessary to act more vigorously and slow down the entire economy.
Everywhere in the world, consumers will feel the impact of the conflict, as will producers who depend on raw materials and even service companies, affected by a possible deterioration in household morale, reduced economic visibility and less favorable financial conditions.
Yet, within this chaos, a new economic configuration is emerging, bringing opportunities. Companies operating in local or renewable energies, or in energy efficiency, will be the first to benefit. Those linked to defense and security will also emerge strengthened, supported - in particular - by Germany's rearmament effort which has just put an end to 70 years of low military investment. Finally, conventional energy producers themselves will be able to tap into the increased profits to support their energy transition. More generally, any company that helps optimize resources or works for European independence in terms of strategic goods, services and materials should have the wind in favor. Just like the traveler returning to the USSR in the Beatles song: “You don't know how lucky you are, boy” ».
