By Surya P Sethi*

This piece is not an attempt to take sides or question the morality of country positions on the Ukrainian conflict. It is simply a cry for attention by the author from a lower middle-income country, speaking for all companion countries in the bottom half of the World, to highlight their suffering and immense collateral damage from a war, not of their making!

By now it is clear, even to the most casual observer, that the Ukrainian conflict that completed its first 100 days on June 3, 2022 is a war with global repercussions way beyond the current battle fields in Eastern and Southern Ukraine. Only some very serious geopolitical risks and imminent threat to the prevailing world order could have prompted the 99 years old Henry Kissinger to remind world leaders, gathered at Davos last week, the role of Russia in a stable Europe and the need for a neutral Ukraine as a bridge between Russia and the Eastern flank of NATO. Kissinger minced no words in forecasting a new alliance building up for another cold war if the war in Ukraine does not end quickly with a negotiated settlement within the historical context he outlined.

The use of the US Dollar, the world’s dominant reserve currency, and the prevailing western controlled financial system; have been described as “weapons of financial destruction” even by the mild-mannered Canadian Broadcasting Service News; while predicting dire long-term consequences for the global economy. And if that is not enough one has to only listen to Jefferey Sachs’speech at the UN to gain a perspective on the food crisis that the Ukrainian conflict is unleashing on the World’s Poor. Even Henry Kissinger alluded to the food crisis and other disruptions in his address at Davos.

And amidst all this, it has been most heartening, as an Indian, to see India enunciate its clear stand demanding an immediate end to the war in Ukraine through dialogue. No one could have stated the ground realities of the current world order and India’s stand more succinctly than Foreign Minister Jaishankar in his recent interview at the Bratislava Forum.

As in Bratislava, off late, India has been reprimanded in all global fora for not joining the Western alliance and for her oil imports from Russia. And this brings me to the latest Weapon of Mass Destruction unleashed on the global poor; already battling food and supply chain shortages and consequent rise in prices of basic lifeline goods and services. It is the sixth stage of Sanctions against Russia that seek to reduce the West’s oil dependence on Russia to 10% of the levels prevailing before the Russian invasion of Ukraine. In addition to replacing Russian imports, the measures include biting restriction on shipping of Russian oil and oil products. To understand the consequences of this move let us look at the IEA’s estimate of Russian Oil Exports.

The total oil and oil product export from Russia in 2021 averaged just under 8 million barrels/day. Russia is the world’s third largest oil producer behind the United States and Saudi Arabia. As per IEA, Russia is the world’s largest exporter of oil to global markets and the second largest crude oil exporter behind Saudi Arabia. In December 2021, Russia exported 7.85 mb/d of oil and oil products; of which crude and condensate accounted for 5 mb/d, or 64%. Oil product exports totalled 2.85 mb/d, of which 1.1 mb/d was gasoil, 650kb/d was fuel oil 500 kb/d was naphtha and 280 kb/d was vacuum gas oil (VGO). Gasoline, LPG, jet fuel and petroleum coke made up the remaining 350 kb/d.

Again, as per IEA about 60% of the Russian oil and oil product export goes to OECD Europe and about 8 % to USA. All OECD countries put together accounted for over 71% of Russian oil and oil product export in late 2021; with China accounting for a further 20%. So, the first thing to note is that India and the rest of the World (excluding OECD and China) is a very small buyer of Russian oil and oil products, together accounting for less than 9% of Russian exports in late 2021.

More importantly, even if the non-OECD world (including China) miraculously increased their end 2021 share of Russian oil and oil product export by 40%, despite the sanctions on shipping; and the OECD succeeds in reducing its dependence on Russian oil and oil products to 10%, of the end 2021 levels, as proposed; well over 4 million barrels a day of oil and oil products will be taken out of the supply chain! This will be the proverbial last straw on the backs of the bottom 50% humans on mother earth. With both crude and product inventories at or below the bottom of their historical bands I predict Brent rising to the $160-$175/barrel range by year end. It recently touched $123.5/barrel and is currently trading above the $121/barrel level. A rise to the $160+ range would spell economic disaster for India and the bottom half of the world that is barely coming out of the Covid crisis.

Higher gas prices are already bringing back coal and the IEA estimates that in 2021, the world equalled or surpassed the peak 2013 coal usage of 3865 MTOE. And that sets the World back on its climate commitments – once again impacting the bottom 50% disproportionately.

Do we really need this self-inflicted wound? What wrong have the bottom 50% humans done to deserve this? Have they invaded Ukraine? Has not everybody demanded an immediate cessation of hostilities, followed by dialogue? Does anyone care? Well Jeffery Sachs believes that the rich couldn’t care less! And yes, the West believes that India must be blamed for all this!

*Energy & Climate Expert, Formerly Chief Investment Officer IFC, (World Bank Group) Washington DC; Principal Advisor (Power& Energy) & Core Climate Negotiator, Govt. of India; Professor Energy & Climate Policy, LKYSPP, National University of Singapore; and UNESCO Chair Professor Climate Science & Policy, TERISAS, New Delhi.