Russia Ukraine Crisis and Crude Oil Markets: there is still a ray of hope for peace!

 

With the price of crude oil already reaching 14-year high, the stakes cannot be any higher for the global economy as a whole. As of 12:45 GMT, WTI and Brent recorded $110.45 and $112.69 respectively.

The anxiety in Europe on many fronts is palpable and may soon drift out towards the periphery of the planet slowly, but steadily, unless a miracle happens in changing the status-quo.

Even the Western leaders, who were compelled to impose heavy sanctions on Russia, may be wondering about the inevitable consequences on their economies due to the mushrooming energy crisis - just one among many; releasing the SPRs, Strategic Petroleum Reserves, did not do the trick in the past; nor will it do in the future, as its positive impact has clearly been eclipsed by the concerns about the potentially serious supply side problems – of course, if the conflict goes on for long.

Although the West has been a unifying front at present against Russia, cracks may appear in the alliances when the individual economies cannot handle the burden anymore, especially, those which still rely on Russian gas; finding substitutes at short notice is easier said than done.

In order to address the shortage of crude oil supply, there is only one thing that needs to be done – increasing the very thing in question.

Owing to the pledges made to going green, even the Western countries that have huge petroleum and gas reserves, cannot go back on their word while reversing the policies; the USA is a case in point.

Against this backdrop, the prospect of reviving the Iranian nuclear deal has been grabbing headlines recently; the Iranian state-backed media, however, has lost some of the optimism about the revival – in a stark contrast to their previous positions, two weeks ago.

If the West and Iran can revive the deal, it certainly is going to be a short-term game changer, though: on one hand, Iran wants to boost its coffers, having suffered for years under sanctions; the West, on the other hand, wants oil – a lot of it in the current circumstances. In short, it is a win-win situation for both.

At the war front, meanwhile, there was a ray of hope yesterday despite the heavy fighting, claims and counter-claims: the Russian and Ukrainian delegations met in Belarus on Thursday and even agreed to explore the possibility of establishing a land corridor for the transport of goods via the safe passage.

Although President Putin maintains a tough position against Ukraine at the moment, there is a possibility of reaching a compromise in the coming days: Like President Trump – and President Erdogan of Turkey for that matter – President Putin has showed, time and again, the tendency to bury the hatchet, repair strained friendships and then move on, without losing the focus on Russian interests, of course.

For instance, when a Russian fighter jet was shot down by Turkey near its border a few years ago, at the height of the Syrian conflict, President Putin and President Erdogan publicly fell out and the former even threated to install Russia’s S-400 anti-missile system near the border; less than a year later, however, not only did they get their friendship back on track, but also managed to seal a defence deal, procuring the same anti-missile system, incurring the wrath of the big powers of the NATO, in which the latter is a significant member.

President Trump was no different; he addressed the North Korean leader in unflattering terms in the UN General Assembly in 2017, when the whole world was watching him – and the session. In less than a year later, they met in person on North Korean soil, built up a lasting friendship and the former even started addressing the latter as, Chairman Kim.

In this context, President Putin too may soften his stand in order not to let the crisis get out of hand.

The world is holding its collective breath up until such a development becomes a reality, exactly the way President Kennedy brought the Cuban Missile Crisis to an end in the early 60s.

It is the ultimate wish of the beleaguered Ukrainians, anxious Europeans, investors in general and of course, a huge audience of oil and gas consumers right now, regardless of the economic zone they belong to. Otherwise, we will sleepwalk into a heavily polarized world that makes the Cold War era pale into insignificance.