This is something few would want to see happen and efforts continue to prevent it.
But as the Russian-Ukrainian crisis continues and escalates, questions are beginning to arise about what an invasion could mean for Ireland, and more specifically for its economy and businesses.
This is something the government is supposed to assess, as concerns mount.
If military action were to begin between the two states, experts say the economic impacts would stem not only from the disruption and fear of war, but also from sanctions that could be imposed on Russia by the West.
Energy prices and security are, of course, high on the list of concerns and risks that Foreign Secretary Simon Coveney has reported to Cabinet in recent days.
Russia produces 11% of the world’s oil supply and according to David Horgan, managing director of Petrel Resources, any significant loss in Russian energy exports would cause prices to spike again.
“That’s partly why the price has already gone up,” he said.
“It’s up 20% in the last four or five weeks to around €90 [a barrel] today. And that hasn’t trickled down to the Irish market yet because it takes around five weeks for the price of petrol to reflect the crude market.”
But the even bigger impact would be on the gas market.
Russia is the world’s second-largest gas producer and Europe’s largest supplier, with a third of it flowing through pipelines that run through Ukraine.
Thus, sanctions or an interruption of supply would lead to further increases in the cost of supply in the already booming wholesale markets.
This would in turn directly drive the cost of electricity generation here, as Ireland relies heavily on gas-fired power stations.
“The gas market has really gone up from $2 to about $30 per million BTUs,” Horgan said, adding that if that trickles down to the electricity market, consumers will feel more. .
However, it is not certain that military action would disrupt the supply of Russian gas to Europe, which currently passes through Ukraine.
The impact would not necessarily be immediate as wholesale buyers bought futures on the contracts, over the next six months.
But beyond that it would be felt, exacerbated according to Mr Horgan by a recent shift in Europe from buying under contract to buying on the spot (or on the spot) which gives gas producers more leverage. Russians.
The downstream effects of a spike in gas prices would be felt not only on electricity prices, but also on many other products made from the resource, such as food and consumer goods for example.
However, it is not certain that military action would disrupt the supply of Russian gas to Europe, which currently passes through Ukraine.
“Gazprom finally has the ability to send gas through the Yamal pipeline that runs through Poland,” Jake Stone, an analyst at Independent Commodity Intelligence Services, told RTÉ Radio One’s Morning Ireland yesterday.
“This is currently very underutilized and it would only be a re-routing of the gas that we currently see delivered via Ukraine.”
He also warned that there would be some sort of supply shortage if Russia turned off the gas supply tap, but only a slight one, as existing contingency plans to reroute supplies from other parts of the world are put into effect.
Existing storage sites in Europe would also come into play, Mr Stone said, acting as a sort of buffer until supplies from elsewhere arrive.
In any event, Ireland is less exposed to supply disruptions, he claimed, as much of Ireland’s gas comes from the UK, and it also has its own source in the field. Corrib.
Markets have been jittery over the past two weeks, in part due to uncertainty around Ukraine
Another source of energy used in Ireland which could also be derailed by conflict would be coal.
The Moneypoint power station in Co Clare uses coal imported from Russia, so disruptions could have a direct impact there.
However, the power station has the largest energy reservoir on the island of Ireland with enough fuel storage capacity for three months of operation, compared to standard gas-fired power stations which only contain five days of fuel storage. ‘energy.
It also uses coal imported from Colombia and the United States.
Coal is not the only Russian import in the potential line of fire, however.
According to the Central Statistics Office, in total Ireland imported more than €291 million worth of goods in 2020 and sent exports to the country worth €445 million.
Among the top export categories are perfumes, cosmetics and toiletries, chemicals, medical technologies and pharmaceuticals, according to the tradingeconomics.com website.
Imports from Russia, on the other hand, are predictably dominated by energy and raw materials.
By comparison, €207 million worth of imports of goods and services were received in Ireland from Ukraine and exports sent to the Eastern European state were worth €470 million, according to the website. of the Ukrainian Embassy in Ireland.
Exports to Ukraine are dominated by pharmaceuticals, food products, and alcoholic and non-alcoholic beverages.
While we mainly import grain, fuel, residues and waste from the food industry, metals and state fertilizers.
It is therefore clear that any disruption in either market would be serious for Irish exporters and importers.
Enterprise Ireland has an office in Moscow, but its customers export to both countries.
“Exports from Enterprise Ireland customers to Russia and Ukraine amount to €126 million and €23 million respectively,” it said in a statement.
“Any potential sanction has the potential to disrupt trade flows in the region.”
“Enterprise Ireland is in contact with active customers in the region and although there is currently no significant impact, we continue to monitor the situation.”
Foreign investment could also be affected. Russia does not contribute much to foreign direct investment in Ireland, but Russian companies operate here.
Probably the largest of these is Aughinish Alumina, in Askeaton, Co Limerick, which employs almost 700 people directly and indirectly and is owned by the Russian company Rusal.
Experts believe investors are most concerned about inflation and the interest rate environment [than about] a war they don’t believe will happen
He already faced US sanctions in 2018, which were only lifted the following year.
The big fear about the sanctions is that they could lead to an escalation of the tit-for-tat situation, which could impact a whole range of sectors, including financial services.
In 2014, when sanctions were last imposed on Russia for its capture of Crimea, the West considered blocking Russia from the SWIFT international financial messaging system, but ultimately decided against it.
If such a move were again considered, it could have serious consequences for Irish companies trading with Russia, said John Whelan, international trade consultant and managing partner of The Linkage Partnership.
“From an Irish point of view and from a European point of view, the SWIFT system is really a very detrimental option on all levels,” he said.
He has noticed a marked increase in business activity between Ireland and Russia over the past month as businesses here stock up ahead of any disruption.
“Our imports from Russia over the last month have increased by 500%, so obviously there is – before the sanctions blockade on imports – [worry among] people to bring in their usual products from Russia, so there is a bit of a rush there,” he said.
He said there have also been some interesting moves in exports to Russia for similar reasons.
Markets have been jittery over the past two weeks, in part due to the uncertainty surrounding Ukraine.
Shares of major global consumer brands have been hit on fears of Russian sanctions and at times this volatility has weighed on Irish stocks and, by extension, Irish pension funds.
But at the end of the day, experts believe investors are more concerned about the inflation and interest rate environment, particularly in the United States, than a war they don’t think will happen. will produce.
“I would say the market opinion on Russia invading Ukraine is probably about 65/35 that it won’t,” said Peter Brown of Baggot Investment Partners.
“There is simply too much to lose on both sides. No one is a winner.”
Aidan Donnelly, head of equities at stockbroker Davy agrees. “I think there’s obviously some nervousness about it, but there’s no real panic,” he said.
“And I think even if we were to see an invasion, we would probably see a few days of weakness on the major indices.”
“But the feeling in the market is that it’s not going to happen, that some sense will prevail.”
Hope the market is right.
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