Russia-Ukraine conflict has lasted for nearly seven months. This conflict is not only a military conflict between Russia and Ukraine, but also an economic war between Russia and the United States and its allies. Under the chain reactions such as war and economic sanctions, the world stock market, foreign exchange market, crude oil, grain and non-ferrous metals futures markets have repeatedly fluctuated. What impact will the Russian-Ukrainian conflict have on the world economy in the post-crisis period?
This impact can be discussed from the short-term and medium-term long-term dimensions. In the short term, the impact of the Russian-Ukrainian conflict on the global industrial chain and supply chain is prominently reflected in the supply of raw materials, shortage of parts, and logistics blockage, which mainly affects the following industries and fields.
First, the global "core" shortage may worsen. Russia and Ukraine are key sources of metal palladium and special gases that are indispensable for semiconductor chips. Russia produces about 40% of the world's palladium, Ukraine supplies nearly 70% of the world's high-purity neon, 40% of krypton gas and 30% of xenon. Neon gas and palladium used in the US semiconductor chip manufacturing industry are almost completely imported from Russia and Ukraine. The Russian-Ukrainian conflict has caused temporary interruption of the supply of special gases such as neon, krypton, xenon and other palladium, and has pushed up a sharp rise in global neon gas and palladium prices, which may make the global "core" that has lasted for more than a year worse.
The second is to aggravate the shortage of automotive parts supply. The automobile industry has many related industries and long industrial chains, and cross-border cooperation in the supply chain is very common. Since the outbreak of the Russian-Ukrainian conflict, world-renowned brand auto companies have closed their parts manufacturing factories in Russia and Ukraine. 38 factories in Ukraine alone have been temporarily closed. The products involve wires and cables, production line sleeves, electronic products, car seats, etc., which has once again disrupted the supply chain of the automobile industry chain, resulting in Volkswagen, BMW , Mercedes- Mercedes-Benz and many other German auto manufacturers recently announced production cuts or even suspensions.
The third is to affect the stable supply of important metals such as nickel, titanium, and aluminum. Russia and Ukraine are the major producers and exporters of important metals such as nickel, titanium, and aluminum. For example, Russia's nickel production accounts for 11% of the world in 2021, second only to Indonesia and Philippines , ranking third in the world. Affected by the situation in Russia and Ukraine, the price of metal nickel on the London Metal Exchange in the UK exceeded US$100,000 per ton for the first time on March 8, setting a record high, which can be called "demon nickel". Metals such as nickel, titanium, aluminum are indispensable upstream key materials for manufacturing industries such as aviation, automobile, chemical, and equipment. For example, aircraft and aviation engine manufacturing industries such as Boeing and Airbus need titanium. Nickel can be used to manufacture stainless steel and electric vehicle batteries. The hindered supply of these metals will inevitably affect the normal operation of the supply chains of aviation, electric vehicles, stainless steel and other industrial chains.
Fourth, it causes congestion in sea, land and air logistics and increases in transportation costs. Russia and Ukraine are important channels for cargo transportation in Europe and Asia. The Russian-Ukrainian conflict not only cut off the Black Sea shipping routes through Ukraine, but also caused most of the air and land transportation through Ukraine and Russia to be stopped. Multinational logistics companies had to choose longer Middle East routes as a replacement. International shipping giants including Maersk Shipping and Mediterranean Shipping even stopped accepting Eurasian freight orders through Russia and Ukraine, which not only caused a large amount of cargo transportation blockage and logistics interruption, but also further pushed up the transportation costs since the epidemic.
In the medium and long term, the adjustment and reconstruction of the global industrial chain and supply chain will be accelerated due to the conflict between Russia and Ukraine. In fact, the adjustment of global industrial chain and supply chain has been underway in recent years, especially since 2018, due to the rise of trade protectionism , Sino-US trade frictions, and the COVID-19 epidemic, the highly interdependent industrial chain and supply chain formed in the context of globalization have exposed its vulnerability and risks. In order to reduce the risks of industrial chain and supply chain, major economies have emphasized enhancing their own independence and controllability of key industrial chains and improving the elasticity of key supply chains.Affected by this, the layout of the global industrial chain and supply chain has shifted from the principle of comparative cost advantages to taking into account costs, benefits and safety. Maximization of cost-effectiveness is no longer the most important decisive factor in determining the global industrial division of labor pattern. Risk and safety enter the production function as new variables, becoming an important consideration that affects the layout of processing and manufacturing bases of multinational enterprises. Many companies are even willing to sacrifice part of their benefits to ensure safety.
Under this logic, multinational enterprises attach more importance to the stability and security of the industrial chain and supply chain, especially reducing dependence on external procurement and implementing supply chain diversification strategies. The global industrial division of labor system is facing restructuring, and short-chainization, decentralization, localization, regionalization, and campization that meet security requirements have become the direction of adjustment of the global industrial chain and supply chain. The Russian-Ukrainian conflict has further intensified this trend.
It is undeniable that in the context of the intensification of strategic game between major powers, the spread of the epidemic, and the outbreak of geopolitical conflicts, the adjustment of industrial chain and supply chain may be "individual rational" for major powers, but it brings "synthetic fallacy" to the world as a whole, because it significantly increases the operating costs of the global industrial chain and supply chain, reduces the operating efficiency of the world economy, which is not conducive to the smooth operation of the world economy and the haze of the impact of the epidemic as soon as possible.
At present, financial sanctions have become the normalized tool and economic weapon for the game of major powers to replace "hot war" and "cold war". The conflict between Russia and Ukraine is constantly escalating, and the US and the West continue to increase financial sanctions against Russia, which is bound to become a catalyst for changing the future international financial order and promote the profound evolution and adjustment of the international monetary system of and the global financial structure.
Since the Russian-Ukrainian conflict, the United States and the West have imposed all-round, undifferentiated and unprecedented sanctions on Russia. Financial sanctions are particularly serious. They have successively launched financial killers such as banning the Russian Central Bank's overseas assets, kicking major Russian banks out of the Global Interbank Financial Telecommunications Association (SWIFT), restricting financing for Russian financial institutions and other leading companies in the industry, significantly selling Russian financial assets, and lowering Russia's sovereign credit rating to junk level. The US Treasury Department even launched financial killers such as banning the Russian government from repaying US dollar debt through the US bank account, aiming to shake Russia's financial infrastructure , cracking down on the Russian financial system, cutting off its channels for using the US dollar, and weakening Russia's overseas financing and self-rescue capabilities.
Affected by sanctions, the Russian financial market once experienced severe turmoil, and the ruble depreciated sharply. Especially since Russia cannot enter the international debt repayment market, it may face the risk of a historic default. In recent years, although Russia has established a shield against financial sanctions to a certain extent, and has also taken some countermeasures since the conflict between Russia and Ukraine and the US and Europe, Russia's economy and finance will inevitably suffer significant losses.
The Russian-Ukrainian conflict is both a geopolitical dispute and a currency dispute. The cracks in the existing international monetary system have emerged, and the curtain of the new international monetary system is opening. The US dollar accounts for 40% of international payments and 59% of global reserve currencies. In the short term, the hegemony of the US dollar cannot be shaken. However, using the US dollar as a weapon is exactly what is called a financial war. The United States and the West freeze a country's reserve assets of hundreds of billions of dollars, which not only casts a shadow on the stability and reliability of the international monetary and financial system and order, but also makes the world question "risk-free assets" such as reserve assets, and then subverts its understanding of the current global payment and reserve system. The "de-dollarization" force will accelerate the profound and major adjustments and reconstruction of the Jamaican system and the international financial structure after World War II.
First of all, the process of "de-dollarization" of the international reserve currency pattern will be further accelerated. The unprecedented sanctions imposed by the United States and the West on Russia fully expose the drawbacks of the world's economic system's excessive dependence on the US dollar and the US financial system, which will make countries around the world place the security of reserve assets in a prominent position, and prompt more countries to seek diversification of foreign exchange reserves, settlement currencies and payment systems, accelerate the "de-dollarization" process, and then shake the foundation of the current international financial system.
In order to respond to sanctions, Russia announced that it would directly settle with "unfriendly countries" in the fields of energy, commodities, etc., and accelerating the decoupling of the US dollar and the US-European financial system will become a major trend. Meanwhile, the Central Bank of India is exploring the establishment of a "rupee-rouble" trade payment mechanism with Russian Central Bank to bypass the US dollar. Saudi Arabia is also actively consulting with China to discuss denominated some of the oil it sells to China in RMB. Previously, 17% of China-Russia bilateral trade has been settled in RMB, and the conflict between Russia and Ukraine and sanctions against Russia will drive the proportion of RMB settlement payments to continue to rise. These new strategic trends in emerging economies will inevitably weaken the dominance of the US dollar in the global oil market and have a huge impact on the petrodollar system.
Secondly, international capital flows and global debt and debt structure will tend to be more diversified. Financial sanctions will profoundly change the global capital flow and asset allocation structure, and it is not ruled out that international capital flows will accelerate from Wall Street to other international financial centers. Financial sanctions on Russia will also lead to a more diversified global creditor-debtor structure. For security reasons, enterprises and financial institutions in countries in Asia, Latin America and Africa are likely to reduce US dollar financing to reduce the risk of being "hunted" by the US and European governments. Under this pattern, global cross-border capital flows will form a diversified currency cycle based on the traditional US dollar and euro, and foreign financial assets will flow to trustworthy areas and even return to the country.
Again, SWIFT's credibility as a global financial infrastructure is seriously challenged. The sanctions have caused great doubts about its neutrality as a global financial infrastructure, which has prompted countries to actively seek alternatives, accelerate the development of global non-SWIFT payment and settlement systems, and form a bilateral or small multilateral payment and settlement pattern. At present, more than 20 countries have built independent financial clearing systems, and this crisis has directly spawned the establishment of a new payment and settlement system for important energy trading countries. Once the new payment and settlement pattern takes shape, the proportion of the US dollar will further decline, and there will be two or even multiple payment and settlement rules and standards. Depoliticization will become an important consideration for a country to choose payment and settlement channels, which will inevitably accelerate the reshaping of the international monetary system and the global financial order.
May change the world's food supply pattern
Cheng Guoqiang ( Professor , School of Agriculture and Rural Development, Renmin University of China, and Dean of the National Institute of Food Security Strategy): Russia and Ukraine are important food suppliers in the world, Russia is the world's largest wheat exporter, and plays an important role in the international food market. In 2021, Russia's wheat exports were 32.9 million tons, accounting for 18% of the world; Ukrainian wheat exports were 20 million tons, accounting for 10% of the world; corn exports between the two countries accounted for 19% of the world, sunflower oil and exports accounted for 63% of the world, and rapeseed oil exports accounted for 15% of the world. As a major global food producer and exporter, Russia and Ukraine have a significant impact on the global food market and supply pattern.
First, it seriously impacts both parties' grain production and exports. First, due to the conflict, Ukrainian grain and oil processing enterprises have suspended production, closed ports, railways and other logistics infrastructure have been severely damaged, and grain exports have been blocked. At the same time, grain production in the core area of Ukraine conflict was hit. Second, Russia is subject to economic sanctions from the United States and other Western countries, which not only has food exports hindered, but also affects its import of pesticides, seeds and other agricultural supplies from the international market, which has led to a reduction in grain production this year, putting the overall global food supply level at great risks. Third, as the conflict intensifies, Russia and Ukraine have implemented food export restrictions, such as Ukraine imposing export license restrictions on grain and oil products such as wheat, which will further deteriorate the global food supply situation and affect the stability of the global food market.
Second, it has led to interruption of the global grain supply chain and tightening of market supply, driving a sharp rise in grain prices.The conflict has hindered grain exports between Russia and Ukraine, which directly affects the global supply chain of grain and oil products such as wheat, barley, corn, and vegetable oil, and endangers the food supply of countries that are highly dependent on imports from Russia and Ukraine, especially more than 50 developing countries such as North Africa , West Asia and Central Asia. Among them, more than 60% of wheat imports from countries such as Egypt , , Turkey , , Bangladesh and , Iran are from Russia and Ukraine. The Russian-Ukraine conflict has caused the food security risks of the 500 million people in the above four countries to rise sharply. In the past two years, due to the continued spread of the global COVID-19 epidemic, international food prices have been operating at a high level. The conflict between Russia and Ukraine has intensified this trend, driving further rise in international food prices. Since the beginning of this year, wheat futures prices on the Chicago Futures Exchange in the United States have risen from 758 cents/bushel to 1045.25 cents/bushel, with a cumulative increase of 37.9%; corn has risen 28%; soybeans have risen 25.2%. From the perspective of export prices, the prices of feed and powdered wheat in the Black Sea area were US$300/ton and US$320/ton respectively in February this year, and rose to US$352/ton and US$412/ton in March.
Third, it affects the supply of fertilizers and grain production in some countries. Russia is the world's main supplier of fertilizers, the world's largest exporter of nitrogen fertilizer and urea , the second largest exporter of potassium fertilizer and the third largest exporter of phosphorus fertilizer . Before the Russian-Ukrainian conflict, Russia produced 13.5 million tons of potassium fertilizer annually, accounting for 20% of the global output; exported 10.84 million tons, accounting for 19% of the global trade volume, and had a significant impact on the global fertilizer supply. Since the Russian-Ukrainian conflict, Russia has announced a ban on export of fertilizers. In addition, the impact of economic sanctions on Russia's trade embargo has further aggravated the global shortage of fertilizer supply and further transmitted the risk of grain production to other regions. It is understood that 30% of fertilizer imports from some countries such as Latin America, Eastern Europe and Central Asia are derived from Russia. The Russian-Ukrainian conflict will seriously affect the grain production in these countries, and the risk of grain production reduction is increasing.
Fourth, in the long run, the Russian-Ukraine conflict may reshape the global food supply pattern:
Russia and Ukraine are important food suppliers in the world that have developed rapidly in the past 20 years. Russian wheat has grown from an average annual output of 47.89 million tons from 2000 to 2009 to 83 million tons before the Russian-Ukraine conflict, an increase of nearly 1 times, accounting for world wheat production from 6.4% to 10.8%; wheat export capacity has increased from an average annual output of 9.62 million tons from 2000 to 2009 to 35 million tons before the Russian-Ukraine conflict, becoming the world's largest wheat exporter. Ukrainian wheat has increased from 18 million tons per year from 2000 to 2009 to 29 million tons before the Russian-Ukrainian conflict; wheat exports have increased from less than 3% of the world's trade volume from 2000 to 2009 to 10% before the Russian-Ukrainian conflict. Russia and Ukraine's grain exports accounted for one-third of the world before the Russian-Ukraine conflict, and the Black Sea region became the second largest food supply destination in the world except North America. The escalating conflict between Russia and Ukraine will greatly restrict the development momentum of grain production and trade in the Black Sea region, which is seriously unfavorable to the balance pattern of diversified food supply chains in the global food supply chain, greatly increasing the risk of instability and uncertainty of global food security.
Fifth, the main impact of the Russian-Ukrainian conflict on world energy
The Russian-Ukrainian conflict has brought a wide and profound impact on the world's political, economic and social development, especially it has had a significant impact on the global energy market, energy security, and energy settlement. As the conflict continues, the energy crisis of will further ferment, the global energy pattern and financial order will face new adjustments, and the world economic recovery will be dragged down.
1.1 impacts the international energy market and triggers a world energy crisis
Energy prices have risen sharply. Since the third quarter of 2021, under the combined effect of multiple factors such as insufficient supply and expansion of demand, the world's energy market is in a tight balance, and energy prices have continued to rise. After the outbreak of the Russian-Ukrainian conflict, Russia's oil and gas export expectations fell sharply, and the market's concerns about tight oil and gas supply increased, resulting in a sharp rise in global energy prices. On the day of the conflict, Brent crude oil futures (hereinafter referred to as "Brent Oil") and New York crude oil futures prices both broke through the $100/barrel mark, setting a new high in more than seven years, and then remained at a high level between $100 and $130/barrel (Figure 1) .Within a week after the conflict, the price of Dutch TTF natural gas futures (hereinafter referred to as "TTF natural gas") rose rapidly by 120%, closing at 227 euros/MWh, reaching its highest level in the past 10 years (Figure 2). Affected by the price of natural gas , the real-time electricity price in more than a dozen European countries exceeded 600 euros/MWh, an increase of 8 to 10 times year-on-year (Figure 3).
Figure 1 Brent crude oil futures price trend
Fig. 1 Brent crude futures price
Figure 2 Dutch TTF gas futures price trend
Fig. 2 Dutch TTF gas futures price
Figure 3 German electricity price trend
Fig. 3 German electricity price
A new round of energy crisis is coming. In the 20th century, there were three energy crises around the world. In the Arab oil embargo from 1973 to 1975, the price of crude oil in rose by 3 times; in the 1979 to 1980, the price of crude oil rose by 4 times; in the 1990 to 1992, the price of crude oil rose by 2.5 times. The starting point of this round of energy crisis can be traced back to the outbreak of the new crown epidemic in 2020, the global economy was shut down, energy demand fell rapidly and prices plummeted. The price of Brent Oil fell to below $20 per barrel at the lowest, and the price of TTF natural gas fell to below $5 per MWh at the lowest. In the second half of 2021, the epidemic situation improved, the economy began to recover, energy demand rose and prices rose. After the outbreak of the Russian-Ukrainian conflict, energy supply was severely squeezed, further accelerating the rise in energy prices. As of the end of May 2022, Berry Oil and TTF natural gas closed prices rose by about 5 times and 20 times compared with their lows more than two years ago.
running at a high price may continue for several years. The Russian-Ukrainian conflict has brought a sustained impact on world energy supply and energy demand, and the situation of high energy prices fluctuating will not end in the short term. From the supply side, global supply capacity is tight and supply costs are still high. On the one hand, energy embargo, financial sanctions, and the withdrawal of multinational energy companies will damage Russia's oil and gas production and export capabilities. In addition, due to insufficient global oil and gas inventory and limited idle production capacity, the global oil and gas gap will be difficult to fill in the short term. On the other hand, restructuring the energy supply chain is expensive.
European uses the United States, Qatar and other countries to replace Russian pipeline natural gas, which requires a lot of money and time to build new supporting facilities, and also bear high liquefaction, shipping and regasification costs, which will further push up natural gas prices. From the demand side, rising prices and insufficient supply will force many countries, especially EU countries, to reduce energy consumption. The International Energy Agency predicts that due to the conflict between Russia and Ukraine, European natural gas consumption will drop by 6% in 2022, and world natural gas consumption will also drop slightly . Taking into account the tight energy supply and the rebound in energy demand after the epidemic, it is expected that international energy supply and demand will remain in a tight balance, and there is little possibility of a sharp decline in oil and gas prices. World Bank predicts that global energy prices will remain high until the end of 2024, and are far higher than the average price in the past five years.
1.2 Impact world energy security and reconstruct global energy landscape
The EU is deeply in an energy crisis. In 2020, the EU imported natural gas and oil from Russia accounted for 41% of the total imports (Figure 4) and 27% (Figure 5) [8]. After the outbreak of the Russian-Ukrainian conflict, nearly half of the EU's natural gas supply faced a shortage, and oil supply was under pressure. On May 11, Ukraine closed a key gas transmission station in the east. On the same day, Russia's natural gas transmission to Europe decreased by about 25%. The EU truly felt the pain of "bottleneck" in natural gas supply. Although the EU seeks to get rid of its dependence on Russian energy, it is extremely difficult from the perspective of reality. Among the existing supply channels, there is no room for growth in the local oil and gas production capacity of Europe such as the Netherlands and Norway. Natural gas pipelines outside Russia such as North Africa and Azerbaijan and have been operating at high levels, and the EU and the UK are at historical lows. In terms of new supply channels, OPEC countries have insufficient capacity and willingness to increase production rapidly, and it will take many years to build the LNG supply chain in the United States and Qatar.Taking into account the above factors into consideration, it will be difficult for the EU to "decouple" from Russia's energy in the short term, and energy supply will be restricted in the long term.
Figure 4 EU natural gas import structure in 2020
Fig. 4 EU natural gas import dependency in 2020
Figure 5 EU oil import structure in 2020
Fig. 5 EU crude oil import dependency in 2020
Energy security has received unprecedented attention. This energy crisis issued a warning that energy, as an important foundation for economic and social development, is related to national economy and people's livelihood and national security. Many countries have raised energy security to an unprecedented strategic height, and have issued relevant policies to expand oil and gas supply channels, accelerated the adjustment of the energy structure, and promoted energy transformation with greater efforts. The EU is looking for new oil and gas supply sources in North America, the Middle East, Africa and other regions, and at the same time released the REPower EU energy plan, proposing goals such as doubling the photovoltaic power generation capacity by 2025 to accelerate the speed of energy transformation. Germany has formulated relevant policy drafts, proposing that renewable energy meets domestic power generation needs by 2035, and Germany's wind power and photovoltaic installed capacity will increase by more than twice. The UK has issued an energy security strategy, proposing to accelerate the development of nuclear, wind, solar and hydrogen energy . The Japanese government also said it is considering restarting nuclear power plants to ease energy supply tensions caused by the Russian-Ukrainian conflict.
The world oil and gas territory will accelerate reconstruction. From a global perspective, this conflict has broken the original energy pattern, and the world's oil and gas territory will show a development trend of "two strengthenings" and "two improvements". The "two strengthenings" are that the United States and Europe strengthen cooperation in the field of natural gas, and Russia strengthens the diversification of oil and gas exports. On the one hand, the scale of natural gas trade between the United States and Europe is expected to continue to expand. In 2021, the EU imported US LNG to a new high, reaching 22 billion m, accounting for 6% of its total imports. After the outbreak of the Russian-Ukrainian conflict, the United States and Europe reached an agreement that the United States will supply about 50 billion m every year to the EU by 2030, double the increase on the existing basis.
On the other hand, Russia actively expands the international oil and gas market, accelerates the layout of pipeline projects such as " Siberian Force" and LNG projects such as "Arctic 2", and strives to increase its share in the Asia-Pacific region and the LNG market. After the outbreak of the Russian-Ukrainian conflict, Russia and India's oil trade heated up rapidly. In April, Russia became India's fourth largest oil supplier, with a record market share rising to 6%. In the future, the game between the world's energy system around the two major camps may further heat up, presenting a complex situation where geopolitical games and energy games are intertwined. The "two improvements" are the increase in energy discourse in the United States and the Middle East, and Africa's position in the European oil and gas market has been improved. On the one hand, the focus of global fossil energy production has "shifted westward".
The United States is expected to replace Saudi to become the world's largest oil exporter and Russia to become the world's largest natural gas exporter. Gulf countries such as Saudi Arabia and Qatar will benefit from this energy crisis, and Iran may also return to the international energy market this year. On the other hand, African natural gas is becoming increasingly important to Europe. Africa's natural gas reserves account for about 7.1% of the global total reserves, and the average annual export volume accounts for 18% of the total natural gas imports in Europe, which has the potential to become a new gas source in Europe. Recently, international oil and gas giants such as BP and ExxonMobil have adjusted their non-investment strategies and restarted or accelerated the promotion of previously shelved natural gas projects. In the long run, the "two strengthening" and "two improvements" will promote a new balance between global oil and gas supply and demand, and a new pattern of multi-pole supply of oil and gas will be formed at an accelerated pace.
1.3 Impact the energy settlement system and change the world financial order
The energy settlement system has undergone major changes. After the conflict broke out, the United States and Europe moved seven important Russian banks out of the Global Interbank Financial Telecommunications Association (SWIFT). Russia's energy trade settlement faced huge risks, and the ruble's exchange rate against the US dollar plummeted. On March 23, Russia required that "unfriendly countries and regions" must open accounts in Russian banks to settle natural gas trade in rubles.More than 20 companies in Austria , Germany, Slovakia , Italy and other countries have agreed to use rubles to settle Russian natural gas, and the energy payment system dominated by the US dollar has been impacted. At present, the ruble exchange rate against the US dollar has returned to the pre-conflict level of Russia-Ukraine .
The process of "diversification" of the international financial system has been further accelerated. This conflict has become a catalyst for changing the international financial order and promoted profound changes in the international monetary system and global financial structure. Since World War II, the world's financial system has experienced the era of "golden dollar" and "petrodollar dollar", and the dollar has always been the main currency in global trade settlement and foreign exchange reserves of central banks in various countries. In recent years, the US domestic monetary policy has had a strong negative spillover effect worldwide, causing a huge impact on the financial stability of many countries, especially developing countries and emerging economies. In addition, the United States has imposed financial sanctions such as freezing of US dollar assets on Venezuela, Iran, Afghanistan and other countries, which has caused concerns among the international community about the security of the US dollar, and some countries have begun to reduce their holdings of US dollar assets in large quantities.
In the fourth quarter of 2021, the US dollar's share in the global central bank's international reserve fell to 58.81%, a new low in 26 years (Figure 6). , and the US dollar's status showed a downward trend. During this conflict, Western countries frozen Russia's hundreds of billions of dollars in foreign exchange reserves, which shook the credit of the US dollar, prompting many countries to use other currencies to hedge more in international trade and foreign exchange reserves, and the global currency "diversification" accelerated. Saudi Arabia is considering using RMB settlement in China-Saltz oil trade and including futures contracts denominated by RMB into the pricing system. Russia and India have implemented a "rouble-rupee" trade payment mechanism, which will use their own currencies to trade oil and other commodities. In addition, Russia, China and the EU have all begun to establish financial information exchange systems independent of SWIFT to accelerate the internationalization of their own currency.
Figure 6 International reserve currency structure in the fourth quarter of 2021
Fig. 6 International reserve currency structure in 2021Q4
1.4 Impact the operation of the world economy and drag down the recovery of the global economy
The EU economy suffered a heavy blow. This conflict pushes up the prices of energy and related commodities, resulting in increased energy and raw material costs for EU enterprises, lower profits and lower production capacity. Aluminum’s Spanish branch closed 228,000 t of production capacity; German aluminum giant TRIMET announced plans to cut production by 30% due to rapid rise in electricity prices. The German Industry Association said that Germany's energy-intensive industries have been severely damaged, and major industries such as chemicals, steel, and non-ferrous metals are facing suspension. Relevant German institutions predict that Germany's economic growth rate in 2022 will drop from 2.9% last year to 1.9%. The European Central Bank predicts that the impact of energy prices will cause the EU's GDP growth to drop by about 0.5% in 2022 [11]. The continued high energy prices will weaken commercial competitiveness and lead to a recession in Europe.
The uncertainty of global economic recovery has increased significantly. After the outbreak of the new crown epidemic, the foundation for global economic recovery has been weak. This conflict has led to rising prices, intensified inflation, and disordered industrial chains and supply chains, breaking the original international economic order, and the uncertainty of global economic recovery has further increased. On the one hand, rising oil and gas prices have aggravated inflation in the United States, Europe, Latin America, South Asia and Africa, and the global inflation situation has further deteriorated. In March 2022, the US CPI reached 8.5%, the largest increase in 40 years [12]. Sri Lanka has shortages of electricity and soaring prices, and is in the worst economic crisis in 70 years.
In order to fight inflation, the Federal Reserve and the European Central Bank are expected to raise interest rates sharply, which will lead to capital outflows and debt scale in developing countries and emerging economies, making inflation and other issues more difficult to solve. Bank International Settlements evaluates that the inflation rate of the United States and Europe will exceed 4.5% in the next two years, and the inflation rate of other developed economies will exceed 3.5%. The era of "big easing" inflation in the past 30 years will end [13]. On the other hand, the driving force of economic globalization is constantly under pressure. The Russian-Ukrainian conflict will lead to the strengthening of the inclination of some countries, the rise of unilateralism, and the rise of resource protectionism.Affected by this, problems such as energy shortage, raw material shortage, freight rates, port congestion, and rising prices will be difficult to completely alleviate for a long time. More and more countries and enterprises are forced to reset their supply chains and conduct production and subcontracting in their local or local areas, which will seriously drag down the economic growth of various countries. IMF latest forecast, the growth rate of 143 economies that account for 86% of the global economic output in 2022 will drop significantly [14]. The British Economist Intelligence Unit predicts that the world economic growth rate in the next 10 years will be only half of the first decade of the 21st century.
2 The enlightenment of the Russian-Ukrainian conflict on the development of the world's energy
The Russian-Ukrainian conflict has had a broad and far-reaching impact on the development of the world's energy, revealing many disadvantages of the fossil energy system, and bringing many profound inspirations to the development of the world's energy in accelerating the development of energy resources, promoting energy connectivity, promoting green and low-carbon transformation, and achieving sustainable energy development.
2.1 Resource security is the foundation of energy security, and the global energy resource game is becoming increasingly fierce
Energy resources are the lifeblood of industry's food and the national economy. Only by ensuring sufficient supply of energy resources can energy security be guaranteed and the initiative in development is grasped. In recent years, with the continuous and rapid growth of world energy demand, the weight of energy in international trade has continued to increase, and energy resources have become the focus of interest games among countries. Ensuring the supply of fossil energy and seizing the commanding heights of clean energy have become an important part of global competition. Fossil energy and resource game affects geopolitical trends. Currently, global fossil energy consumption accounts for 79% of the total primary energy consumption, and is the dominant energy source of the world's energy system. Resource powers such as the United States and Russia are at the forefront in terms of fossil energy reserves, production volumes and export volumes, and have a strong voice in the world energy market.
Review of the three global energy crises in 1973, 1979 and 1990, all had obvious geopolitical factors. The competition for oil resources led to a sharp decline in supply-side output, global oil supply was in short supply and prices soared, seriously impacting global economic and social development. During this conflict between Russia and Ukraine, the United States and Europe hindered Russia's participation in international energy trade. The global fossil energy market game became increasingly fierce. The differentiation and adjustment of the interests of energy producers and consumers has profoundly affected the global political landscape. Clean energy resources are increasingly becoming an important area of energy game. Fossil energy resources are non-renewable, and there are high pollution and high emissions problems during the development and utilization process. In recent years, with the rapid improvement of clean energy technology and economy, countries around the world have regarded clean energy as a breakthrough in energy transformation and actively formulated policies and measures to seize the commanding heights of the new round of energy revolution.
China advocates building a global energy Internet to meet global power needs in a clean and green way . The United States initiates a clean energy recovery strategy to promote the development of low-carbon economy ; proposes the "electricity Africa" strategy to accelerate the development of clean energy in sub-Saharan Africa. The EU has released the "European Joint Action on Cheap, Safe and Sustainable Energy", proposing to increase the clean energy target for 2030 from the current 40% to 45%. India formed an international solar energy alliance and proposed the "One Sun, One World, One Power Grid" initiative. With the rapid advancement of energy transformation, the dominance of clean energy in the world's energy system will become more prominent. Mastering clean energy resources means occupying the commanding heights of global energy governance and playing a key role in enhancing global influence.
2.2 There are no energy islands in the world, and building an interconnected energy community is the key to ensuring energy security
In today's economic globalization, energy cooperation among countries is becoming increasingly close, and the energy supply chain, industrial chain and value chain are integrated with each other. There are no energy islands in the world. Promoting energy connectivity and building an energy community with a shared future in line with the laws of historical development will play a key role in promoting resource development, reducing energy consumption costs, and ensuring energy security.
Interconnection is an inevitable choice based on energy resource endowment. The global distribution of energy resources is very uneven, and resource endowment and energy demand are characterized by reverse distribution.From the perspective of fossil energy, global oil and gas production is mainly concentrated in the United States, Russia and the Middle East, and consumption centers are concentrated in North America, Europe and Asia. More than 20% of the world's coal, 75% of oil, and 32% of natural gas are allocated to across the country, and the fossil energy transportation channel has become the "main artery" of global energy. From the perspective of clean energy, 70% of the world's wind energy is distributed in high-latitude areas and offshore areas of various continents, and 85% of the solar energy is distributed near the low-latitude equator areas. Clean energy-rich areas are hundreds to thousands of km away from the load center. They need to be converted into electricity on-site and long-distance transmission to achieve large-scale development and optimal configuration of clean energy. The reverse distribution of global energy resources and demands determines that only through interconnection and large-scale allocation can global energy demand be met.
Interconnection is the best way to reduce energy development costs. Economicality is the core factor that determines the way energy resource development is developed. Strengthening interconnection and expanding the scope of energy allocation can achieve efficient connection between the supply side and the demand side, and significantly reducing the cost of energy development and utilization is the most economical way of energy development. The electricity from the energy bases in western and northern China is transported to the eastern and central regions through ultra-high voltage. The landing electricity price is 5 to 8 minutes/kWh lower than the local thermal power grid price. Both the sending and receiving areas can earn . Clean energy such as solar energy, wind energy, and hydropower have volatility, randomness and cross-time and space complementarity. Through interconnection, time difference, seasonal difference and resource difference can be fully coordinated, clean energy development costs can be reduced, and complementary and efficient utilization of multiple clean energy. Taking the Northeast Asia region as an example, compared with the local independent development model, to build the Northeast Asia energy Internet, it only requires an increase of US$46 billion in investment in power grid interconnection, saving about US$170 billion in investment in power and energy storage, with significant benefits.
Interconnection is the only way to ensure energy security. Energy security is about national security, and ensuring energy security is by no means "closing the door", nor is it the so-called "energy independence". With the increasing degree of global energy integration today, we can actively integrate into the global energy market, expand energy supply channels, and form a widely connected energy supply system, so as to effectively play a large-scale supporting role in interconnection and meet the energy needs of various countries in routine and emergency situations. Strengthening international energy cooperation, expanding the scope of connectivity, and building an energy development community and a community of interests where you and me are you, is the fundamental solution to ensuring energy security.
During this Russian-Ukrainian conflict, the United States still imported a large amount of Russian oil, and many EU countries agreed to use rubles to purchase Russian natural gas, and India increased its procurement of Russian coal. The political slogan of "energy independence" did not change the pattern of energy interconnection. Looking ahead, with the large-scale development and utilization of clean energy, power systems will become the main carrier of world energy allocation, and power trade will become the main form of world energy trade. Accelerating the promotion of widespread interconnection of power grids will effectively ensure the world's safe supply of energy.
2.3 Accelerate the green and low-carbon transformation of energy, and implementing the "two substitutions" is the fundamental solution to promoting the sustainable development of world energy
In the context of responding to climate change, the world's energy development model dominated by fossil energy is unsustainable. The Russian-Ukrainian conflict highlights the importance and urgency of accelerating energy transformation. To solve the problem of world energy development, we need to establish a global energy concept, accelerate the promotion of global energy transformation and transformation, comprehensively promote clean substitution and electricity substitution ("two alternatives"), build a global energy Internet, and provide the world with a safer, cleaner, more efficient and sustainable energy supply. The world's energy supply system based on fossil energy faces systemic risks.
Since the industrial revolution, the world has consumed more than 600 billion t of standard coal in fossil energy. While promoting economic and social development, it is facing prominent problems such as resource shortage, climate change, and geopolitics, which brings systemic and global risks to the sustainable development of mankind.According to the current development intensity, the world has proven that the remaining oil and natural gas reserves can only be exploited for 50 years and 51 years respectively. The use of limited fossil energy as fuel is unsustainable and faces huge resource risks. Global fossil energy consumption accounts for 79% of the total primary energy consumption, generating 33.5 billion tons of carbon emissions each year, accounting for 80% of the total global carbon emissions (Figure 7). As of the end of 2021, the global average temperature will rise by 1.2℃ compared with before the industrial revolution. According to this trend, it will exceed 3℃ by the end of this century, causing irreversible disasters and facing the risks of global climate change. Fossil energy is a strategic resource. At present, the international energy market is volatile, and anti-globalization, unilateralism, and protectionist ideas are surging, and they are facing huge geopolitical risks.
Figure 7 Global carbon dioxide emissions
Fig. 7 Global carbon dioxide emissions
The key to respond to the fossil energy challenges is to follow the laws of energy development and accelerate the implementation of "two substitutions". The world is rich in clean energy resources, with theoretical accumulation of solar energy, wind energy and hydropower exceeding 130 trillion kW. Only five percent of the development can meet the world's energy needs . Electric energy is a clean, efficient, and zero-emission energy, and the economic value generated is equivalent to 17.3 times that of equal amount of coal and 3.2 times that of oil. For every 1 percentage point increase in the proportion of electricity in terminal energy, the energy intensity decreases by 3.7%. To solve the global energy problem, the fundamental solution is to change the energy development model, accelerate the promotion of clean and electrical energy replacement, and completely get rid of fossil energy dependence.
Clean replacement is to replace fossil energy power generation with clean energy such as solar energy, wind energy, and hydropower in the energy production process, and accelerate the formation of an energy supply system dominated by clean energy to meet energy consumption needs in a clean and green way. Electric energy substitution means using electricity instead of coal, electricity instead of oil, electricity instead of gas, and electricity instead of diesel in the energy consumption link. It uses clean power generation, and accelerates the formation of an energy consumption system centered on electricity, making energy use greener, more efficient and more economical. The "two alternatives" are in line with the laws of world energy clean, electrified and efficient development. They are a strategic way to accelerate energy transformation. They can reduce fossil energy consumption from the source, establish a development model based on clean energy, provide sufficient, economic, clean and sustainable energy supply for the economic and social development of all countries, fundamentally solve prominent problems such as global resource shortage, climate change, and geopolitics, and achieve sustainable development.
Modern energy technology level and economy have been greatly improved, laying a solid foundation for accelerating the implementation of the "two alternatives" and promoting energy transformation. At present, the world's energy technology is booming, and the conversion efficiency of photovoltaic cells continues to increase at a rate of 1 to 1.5 percentage points per year, reaching more than 21%; the capacity of offshore wind power stand-alone engines is constantly increasing, 12 MW fans have been put into commercial operation, and 14 MW fans have been successfully developed; the ±1100 kV ultra-high voltage DC transmission distance can reach more than 6000 km, and the transmission capacity reaches 12 million to 15 million kW. With the advancement of technology, the economy and competitiveness of new energy have been continuously improved. In the past five years, the global wind power and photovoltaic power generation costs have dropped by 30% and 75% respectively. The winning bid prices of several photovoltaic and wind power projects in South America and West Asia have been as low as 2 cents/kWh. It is expected that by 2025, the competitiveness of photovoltaic and onshore wind power will exceed fossil energy power generation. Overall, the accelerated implementation of the "two substitutions" is technically feasible and economically competitive, and the conditions for accelerating development are already in place.
Global energy Internet provides efficient and feasible system solutions for realizing world energy transformation and transformation. The global energy Internet is a new energy system for clean energy production, wide-area configuration, and electrification of consumption. It is an important platform for the large-scale development, transmission and use of clean energy on a global scale. It can apply advanced technologies such as smart grids and ultra-high voltage grids, widely connect large energy bases and various distributed power supplies, and transport clean energy to thousands of households. It has the characteristics of strong grids, multi-energy complementarity, highly intelligent, and open interaction. It is an in-depth transformation of the existing energy system by the Internet concept. Building a global energy Internet can accelerate the "two alternatives" and comprehensively promote the transformation and transformation of world energy.
First, improve the quality and efficiency of energy transformation.Building a global energy Internet will promote the large-scale development and utilization of clean energy such as water, wind, and light, and achieve global energy structure adjustment, layout optimization and efficiency improvement. Compared with the existing development model, the global clean energy development speed and the growth rate of the electrification rate of the whole society will both increase by more than 1.5 times. By 2050, the global clean energy accounts for more than 80% of the primary energy and the electrification rate exceeds 60% . The second is to reduce greenhouse gas emissions.
Construction of the global energy Internet will achieve "double dominance" and "double decoupling", namely, clean energy dominance, energy consumption dominance, energy development decoupling, and economic development decoupling. According to research and calculation, energy-related carbon emissions will peak around 2025, with a net net zero around 2050 (Figure 8). The marginal cost of carbon emission reduction in the whole society is only US$15/t, far lower than other solutions (US$30-100/t), achieving the goals of the Paris Agreement with a faster, lower cost and better path. The third is to ensure sustainable energy supply. By building a global energy Internet, the global per capita annual electricity consumption will increase from 3100 kWh in 2016 to 6200 kWh, a double increase; the electricity cost will be reduced by 1.8 trillion US dollars each year, and fundamentally solve the problem of more than 800 million people not being able to use electricity and 3 billion people not being able to use electricity, so that everyone can enjoy clean, economical and efficient sustainable energy.
Figure 8 Global greenhouse gas emissions forecast
Fig. 8 Global greenhouse gas emissions projections
2.4 Accelerating the transformation and upgrading of the energy system will play a key role in promoting global economic recovery and sustainable development
Accelerating energy transformation is a strategic measure that concerns the sustainable development of mankind. It not only plays a key role in ensuring energy security, but also drives industrial upgrading, promotes economic development, and creates space for cooperation. It is a strategic measure that wins multiple goals.
opens up a new path for industrial upgrading. The energy Internet connects all aspects of energy production, allocation, consumption, etc., with many investment opportunities, large development space, high commercial value and strong innovation momentum, which is an important pillar for promoting industrial transformation and upgrading. Accelerating the promotion of energy transformation and transformation, building an industrial system and production and lifestyle based on clean electricity will drive the development of strategic emerging industries such as high-end equipment manufacturing, new energy, new materials, electric vehicles, energy conservation and environmental protection, and new generation information technology, promote traditional industries such as steel, construction, and chemical industry to enter a greener and more efficient form, promote the upgrading of the industrial chain and the improvement of the value chain, benefit the entire energy industry chain and related industries, and bring major opportunities for the innovation, development, transformation and upgrading of enterprises in all countries around the world.
creates a new engine for economic recovery. At present, the world economy is deeply adjusting and recovering slowly, and the growth momentum is insufficient. Accelerating the transformation and transformation of energy will create a new engine of economic growth in the "post-epidemic period", drive investment and construction of smart grids, ultra-high voltage, clean energy, etc., accelerate breakthroughs in cutting-edge technologies such as big data, the Internet of Things, cloud computing, and artificial intelligence, and create a new digital economy, sharing economy and platform economy, providing strong impetus for global economic growth. According to research and calculation, the global energy Internet is used to promote global energy transformation and transformation, with a total investment of more than US$38 trillion, including US$27 trillion in power investment and US$11 trillion in power grid investment, which will create a total of 100 million new jobs, driving the global economy's average annual growth by 0.2 percentage points.
Create new space for development cooperation. Accelerating the promotion of global energy transformation and transformation will create a new situation of large-scale development and utilization of clean energy, promote the development and sharing of clean energy, and all resource exporting countries, passive countries, and receive countries can benefit, enhance national mutual trust, and reduce confrontation and conflicts caused by competition for fossil energy; we will give full play to the complementary advantages of developed countries and developing countries in terms of technology, market, resources, etc., promote the transformation of clean energy resource advantages of developing countries and regions into economic advantages, create a new pattern of peaceful, inclusive and win-win global governance, achieve global inclusive growth and common prosperity, and make the world a "global village" with sufficient energy, blue sky and green sky, brightness, and peace and harmony.
3 Conclusion
) The conflict in Russia and Ukraine and the energy sector sanctions have affected the international energy supply and demand relationship, and have had a significant impact on the international energy market, world energy security, energy settlement system, and global economic development, and have brought a wide and far-reaching impact on the world's energy development.
) Energy is the material basis for economic and social development. Ensuring the sufficient supply of fossil energy and seizing the commanding heights of clean energy are important contents of global discourse competition.
) The world has no energy islands. It is a global energy community with extensive interconnection, which is in line with the characteristics of energy resource endowment. It is an inevitable choice to promote international energy cooperation, reduce energy supply costs, and ensure energy security.
) The core of sustainable development is clean development and promoting the world's energy transformation. The key is to implement the "two alternatives" and build a clean-led and electricity-centered energy production and consumption pattern. The global energy Internet can meet global power supply in a clean and green way, providing a systematic solution to accelerate the "two alternatives" and promote sustainable energy development.
) Accelerating the transformation of energy is of great significance to opening up a new path of industrial upgrading, creating a new engine of economic development, and creating new space for development cooperation. It will play a key role in promoting global economic recovery and sustainable development.
