Daily Update: March 7, 2022

Start each business day with our analyzes of the most pressing developments affecting the markets today, along with a curated selection of our latest and most important news on the global economy.

The economic, trade, credit and energy implications of the Russia-Ukraine crisis are felt far beyond the region.

The United States announced this weekend that it may soon extend sanctions to ban Russian oil imports alongside its EU allies, while some European partners have stressed their need to maintain the access to Russian energy sources. Sanctions already implemented by the international community, while not specifically targeting Russian energy, have already limited access to credit for Russia-related transactions and made typical buyers hesitant or fearful of buy Russian cargo. Russia threatened to derail the revived US deal to lift sanctions on Iranian oil sales, demanding a written guarantee that the sanctions would not hinder Russia’s trade with Tehran, according to S&P Global Commodity Insights. Tech giants have changed their services in Russia to support Ukraine, blocking communication and digital payment networks.

Overall, the geopolitical shock increases the risks of restricted trade and capital flows as well as disruptions to economic growth and short-term credit conditions, and could have broad long-term ramifications, as disagreements between Russia and NATO over security issues are likely to persist. , according to S&P Global Ratings. To date, S&P Global Ratings has taken more than 30 rating actions of financial institutions and non-financial corporations, sovereign states and international public financial entities citing the Russian-Ukrainian conflict, oil prices energy or both as factors determining the decision.

“Demand for cryptocurrencies by Russian residents has increased as sanctions threaten to severely restrict the country’s access to the global financial system. This will likely further accelerate the pace of regulatory scrutiny,” S&P Global Ratings said in a recent report, “However, S&P Global Ratings does not believe that cryptocurrency use has reached a scale that could mitigate the likely severe consequences of sanctions on the Russian economy.”

Soaring energy prices, pushed even higher by the aftermath of Russia’s invasion of Ukraine, are shaking up global markets and countries, from the United States to emerging markets. Oil futures on the ICE Brent contract hit a 14-year high in early trading today, hitting $130.89 a barrel and marking the highest since July 22, 2008, according to S&P Global Commodity Insights. . The OPEC cartel does not appear to be preparing to alter its crude production or its partnership with Russia to help balance the market.

“The fundamental principle…is to maximize the costs on the target, i.e. [Russian President Vladimir] Putin and those around him in Russia, while minimizing the costs to the United States and our allies,” a senior U.S. Department of Energy official told S&P Global Market Intelligence in a background call on March 4. “We have no strategic interest in reducing the global energy supply.”

“Russia exports oil to many countries… The largest importing region is Europe (2.7 million barrels per day of crude oil and 1 million barrels per day of raw materials/oil products). Next comes Asia, mainly China, at 2.3 million barrels per day. of crude and products. The third largest importing region is the United States with 0.6 million barrels per day,” said Richard Joswick, head of global oil analysis at S&P Global Commodity Insights. “Restrictions, on the import of Russian oil, if implemented, it would have very different effects on supply depending on the region and whether it is crude or products, but all markets will see an impact on prices.

At the end of this week, on March 12, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging service, which underpins most international interbank payments, will disconnect seven Russian banking groups from its system. This will prevent or significantly reduce the Russian banking system’s access to the global financial system, markets and infrastructure, but will likely be limited and manageable for banks outside of Russia, according to S&P Global Ratings. International banks, including those in the Middle East and Africa, have limited exposure to Russian and Ukrainian counterparties.

“The conflict in Ukraine and the imposition of sanctions has potential implications for the financial sector far beyond the combat zone,” S&P Global Ratings said in a March 4 report. “We remain mindful of the potential for significant second-order effects of the conflict, which could further lead us to revise downwards our baseline assumptions regarding the operating environment, most obviously in EMEA.”

Today is Monday, March 7, 2022and here is today’s essential intelligence.

Written by Molly Mintz.

Economy


Economic Research: What Do Higher Energy Prices Mean for Emerging Markets?

As emerging markets continue to recover from the pandemic, they now face the possibility that international energy prices will remain high or even climb for longer. Oil prices hit seven-year highs in February, spurred by a recovery in mobility, concerns over spare capacity among major producing nations, record-low inventories, slow progress in lifting sanctions on the Iran and now the conflict in Ukraine. Russia’s central role in the world’s energy supply means that the conflict will put pressure on energy prices.

—Read the full report from S&P Global Ratings

Access more information on the global economy >

Capital markets


Credit FAQ: How the Russian-Ukrainian conflict could affect banks in the Middle East and Africa

In this FAQ, S&P Global Ratings examines the high-level effects of current events in Russia and Ukraine on banks in the Middle East and Africa. These conclusions are likely to evolve according to the evolution of the conflict. S&P Global Ratings recognizes a high degree of uncertainty regarding the scope, outcome and consequences of the military conflict between Russia and Ukraine. Regardless of the duration of military hostilities, the sanctions and related political risks will likely remain in place for some time.

—Read the full report from S&P Global Ratings

Access more information on capital markets >

International trade


Listen: Shipping and Commodities Seek Alternatives as Russia Sanctions Bite

The commercial and financial ramifications of the Russian-Ukrainian conflict will be felt for a long time. As the conflict escalates, sanctions have been imposed on Russian banks and shipping companies. This means that many companies are unwilling or unable to trade with Russia. In this podcast, Pradeep Rajan, Sameer C. Mohindru, Zhuwei Wang and Shriram Sivaramakrishnan of S&P Global Commodity Insights explain what the latest developments mean for the maritime sector, global trade, shipping and key commodity prices, including crude and refined petroleum products. , cereals and coal.

—Listen and subscribe to Commodities Focus, a podcast from S&P Global Commodities Outlook

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ESG


Germany to double wind and solar investment as part of broader energy policy review

Germany must double down on its renewables policy while reviewing plans to shut down coal and nuclear in response to the heightened threat to Russian gas supplies, according to the bill seen by S&P Global Commodity Insights. The so-called Easter package includes reform of renewable energy and offshore wind laws, bringing wind and solar capacity to an 80% share of the energy mix by 2030. This would require at least a doubling of annual production at 572 TWh, the draft said.

—Read the full article from S&P Global Commodities Outlook

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Energy and raw materials


Russian refineries are beginning to feel the impact of buyers shunning petroleum products

Russian refineries began to feel the effects of a sharp drop in export sales of petroleum products following the country’s invasion of Ukraine. Rosneft’s 240,000 bpd Tuapse on the Black Sea halted crude intake on March 4 because it cannot ship output, while the company’s 342,000 bpd Ryazan refinery in central Russia has reduced the volume it accepts. Although there are no sanctions on exports of Russian crude or refined petroleum products, limited access to credit for Russia-related transactions and fear of energy sanctions have led typical buyers to avoid shipments Russians whenever possible, sources said.

—Read the full article from S&P Global Commodities Outlook

Access more information on energy and raw materials >

Technology and media


Big tech navigates operational and social pressures amid Russia-Ukraine conflict

Big tech companies stepped up to support Ukraine after Russia invaded the country, leading to disruptions to some popular services in the region. Meta Platforms Inc., Twitter Inc., Alphabet Inc., Apple Inc. and Microsoft Corp. were among the companies that took steps to remove Russian state media from their platforms, including cutting access to ad networks, as European regulators moved to revoke media licenses for Russian media. The Russian government responded by restricting access to Facebook and Twitter within its borders.

—Read the full article from S&P Global Market Intelligence

Access more information on technology and media >

Events to come


World Petrochemical Conference 2022

Join the 2022 World Petrochemical Conference to learn more about progress towards a better climate and society and the vital role of chemicals in everyday life. The conference will take place March 22-25, 2022, with a dazzling array of sessions featuring leading chemical companies and organizations discussing critical issues impacting the chemical market, plenty of networking opportunities and a variety of advanced petrochemical training courses. This year’s event will offer both in-person attendance and a virtual platform fully loaded with flexible broadcast options, attendee engagement, advanced networking and sponsorship tools. The event platform will create a one-stop-shop experience for attendees, both in person and virtually.

—Register for the conference on S&P Global

Access more S&P Global events

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