Russian force majeure on resource exports could bankrupt West’s economies: here’s why

“The pain” of a Russian freeze on strategic resource exports “would be felt by both the US and the EU, and all countries listed as ‘unfriendly’ to Russia, as they would have to source the required elements from third country suppliers, and that would entail an appreciable price increase for the commodity, and the extended supply chain costs that entails,” investment consultant Paul Goncharoff told Sputnik, commenting on President Putin’s remarks this week that Russia may restrict its nickel, titanium and uranium exports in response to Western countries’ unfriendly actions.

The US and Europe can expect a 15-20% bump in the costs of its strategic resource imports if Moscow moves forward with restrictions, especially since Russia is in a unique position globally in the production of high-quality nickel, aviation-grade titanium, and enriched uranium, says Maxim Khudalov, chief strategist at the Vector X investment and brokerage firm.

Furthermore, if the Europeans were deprived of access to Russian aviation-grade titanium, that would add to Airbus’s production costs, hitting their bottom line in the high-stakes rivalry with Boeing. Meanwhile, higher nickel costs would mean higher prices for virtually all of Europe’s high-tech products, including electronics and specialized mechanical engineering, the observer said, emphasizing that “all of this will become more expensive in Europe and again allow their American ‘friends’ to grab the remainder of their markets.”

Russia, over the short term, might lose a bit of its export revenues if resources’ exports to the West were curtailed, Khudalov admitted.

“But on the other hand, why do we need export revenues? Generally speaking, the whole point of international trade for us is to sell raw materials in exchange for technology. Western countries have refused to supply us with technology basically going back to 2014. Then the question is: why do we continue to supply them with strategic raw materials? To get some green pieces of paper which they then seize from us? This is a rather strange position. Therefore, here it turns out that since they limit our access to technology, we are starting to limit their access to raw materials,” Khudalov said.

China could become the main beneficiary of a Russian reorientation on resource exports, receiving a 15-20% bump in its cost competitiveness against Western finished goods, and getting a much-needed advantage in the looming trade war with the US, Khudalov summed up.

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