Russia’s attempt to wage economic war with commodities is going even worse than its invasion of Ukraine.
Gas prices, as measured by Europe’s benchmark TTF contract, have tumbled by more than 60% from their August highs, as the region has sought alternative suppliers to Russia, historically its default origin, and beefed up other energy sources too.
Europe’s gas storage facilities are more than 80% full, compared with a 67% figure a year ago, reducing its vulnerability to any effort by Russian President Vladimir Putin to use winter cold as leverage against the region, and its support for Ukraine.
And while Russia’s attempt to weaponise gas is floundering, its effort to use wheat has failed altogether.
Moscow on Wednesday reversed its exit from the Ukraine grain export corridor deal after only two days – during which the withdrawal failed to halt the shipments.
So the other partners in the deal, Ukraine, Turkey and the United Nations, were right to stand up against Russia’s bullyboy tactics.
And they were not taking quite such a risk as it might first appear.
Even President Vladimir Putin looked likely to think twice before attacking a grain vessel. Rationing Europe’s energy supplies is one thing, but squeezing food supplies to hungry importers is quite another.
Having alienated the West, President Putin can ill afford to muddy his reputation with the rest of the world with a barbarous act.
That is not to say that we have seen the last of Russia’s attempts to disrupt the grain market.
With only two weeks to go before the Black Sea export deal expires, it is wholly likely that Russia, which blamed this week’s withdrawal on an alleged Ukraine drone strike on Crimea, will find another pretext for offence.
But, as GrainPriceNews has highlighted, Russia has, in the end, much less leverage in the wheat market than in gas. (That could change – GrainPriceNews will explore how in a future piece.) And Russia’s gas stranglehold is weakening, thanks to Europe’s energy stockpiling.
President Putin is diminishing as a force to be reckoned with. The shame for Russia as a country is that it is losing out too – for the long term.
It is losing, in Europe, its top gas customer and has seen its reputation as a grain exporter tarnished.
At least the rest of the world may benefit, if Europe’s energy crisis leads to a surge into renewables, and wheat importers encourage a diversity of origins which would better secure future supplies against climatic, as well as political, disruptions.