Kiev - Cold war, low-intensity war, soft invasion, the return of the Iron Curtain. Whatever the definition of the crisis that has been developing for weeks in Ukraine, what is certain is that commodities and raw materials are playing a decisive role in it.
Cereals, of which Ukraine is a major producer, gold, metals, and most importantly gas and oil. The latter are two pressure instruments (above and beyond the obvious geopolitical balances) that both the Kremlin and the Western countries are fighting over, both on the ground and in the diplomatic corridors.
Washington and Moscow both surfaced last week: on one hand, Gazprom has threatened to stop supplying Kiev if Ukraine fails to pay its debt; we’re talking about 1.36 billion Euros which the country does not have.There is another possibility, which has been voiced by U.S. Republicans and some European Foreign Affairs ministries: the United States may start exporting their gas into Europe.
This option poses a threat but one that is difficult to achieve in the short term, because there are no intercontinental pipelines. Also, the United States has no terminals from which to export liquefied gas, apart from one in Alaska that was closed in 2011 and, if they ever decided to send gas abroad, it would make more sense to target the Asian markets, where prices are higher.
It is a fact, however, that the United States is transforming from a net importer to a potential exporter thanks to recent discoveries in the fields of gas and shale oil, something that weighs heavily in the balance of power.
On the other hand, Ukraine has the largest potential reserves of shale gas in Europe. And then there is us in the Old Continent: 30% of our gas imports come from Russia, and over a quarter of the gas used in Italy comes from Moscow through Kiev.
But Russia depends on Europe commercially: Europe is the destination of 50% of its exports, while the reverse is only 10%. The situation, as anyone can see, is extremely interconnected: all markets, financial and commodities alike, are acting as a transmission belt for these tensions.
FAO (Food and Agricultural Organisation of the United Nations) reported a few days ago that during February, the price index of edibles has had the largest price spike in the last two years. The highest increases were in sugar (+6.2%), oils (+4.9%), and dairy products (+2.9%).
According to the organization, this cannot be attributed fully to the Ukraine effect, but it certainly contributed. Kiev is in fact the fifth largest wheat exporter and third largest corn exporter in the world.
A few days ago, a Coldiretti study warned that we might soon feel the effects of troop movements in Crimea on our dinner table: the cost of wheat hit the highest it has this year and it has an immediate impact on the price of pasta, bread, beer and livestock feed.
The Black Sea area has been known historically for the quality of its cereals: back in 1850, the sailing ships of Agnesi mills would sail from Oneglia to the Ukraine to acquire Taganrog wheat, which was considered the best in the world at the time.
There are two other commodities that can be greatly affected by the situation, especially if Europe and the United States impose sanctions on Russian exports: palladium and potassium.
Moscow is the worldwide leading producer of both. The first is a metal mostly used in the medical, electronics and automotive industries. The second is mostly used to produce fertilizers. In this framework, the price of gold, a traditional safe haven, has also reached its highest point of the year. So at the moment, Ukraine’s future affects us all.