In 2021 the official annualised inflation rate across the whole of the European Community was 2.9 percent having reacted sharply higher as the world came out of its lockdown slumber. A forgivable reaction with supply lines readjusting to global demand surging in just about everything. The European consumer and the European Central Bank were expecting a post-pandemic transition where the central bank would start to run down its Pandemic Emergency Purchase Programme (PEPP), initiated to combat the economic ravages of Covid before an embarkation on any sort of hawkish interest rate path for fear of causing jitters across the Eurozone and its close trading neighbours such as the UK, Scandinavian and Eastern European nations. Christine Lagarde, the ECB President, championed a gradual withdrawal of stimulus, and the loosening of the supervisory mechanism which in part restricted the activity of commercial banks and capped dividend payouts. As oversight withdrew there was an expectation of a normalisation of risk, liquidity and a relative soft landing in which interest rates would not have to be significantly dialled up. 

Then came February 24, 2022, and the pillowed luxury of time envisaged by Lagarde and her cohort turned into the stone-cold concrete reality of war. The illegal invasion by Russia into Ukraine is documented well enough, and so is the localised pain it caused the members of the Common Market. But it is worth recapping that the 2.9 percent inflation of 2021 soon became a historical high of 9.2 percent in 2022. Oil prices from crude feedstocks to every refined instrument rallied from between 30 and 75 percent and whatever policy trajectory the ECB might have envisaged was completely upended and so began a rolling and aggressive upward cycle in interest rates changing from zero in June 2022, reaching 4.5 percent by September 2023, where they stayed for 8-consecutive months. 

What then ensued, and it was a new dimension deployed by all around, was the overt weaponisation of oil. Threats to supply from Russia countered with threats of withdrawal of custom from Europe raged, but all the while the Old Continent struggled with how on earth it was supposed to survive without energy supplies from the East. At the time there was hardly an economy that in some way did not rely on Russian gas and oil supplies. Indeed, using Reuters calculations, in terms of daily flows leading up to the war, the EU imported 2.2mbpd in crude and 1.2mbpd of refined oil products. Such business was an enormous boon for the Russian exchequer and although it would eventually take months, if not years, the Euro bloc and surrounding nations weaned themselves from the very cheap energy which cushioned so many businesses from the aftereffects of Covid and their questionable competitiveness.

In the four quarters of 2022, German GDP growth rate was 3.8, 1.5, 1.8 and 0.8 percent respectively, falling to negative growth for the whole of calendar 2023 to only now starting to recover as its new stimulus begins to land. The demise of its growth is directly attributable to not only the higher cost of energy because of the war, but how it tried to adhere to the EU’s targeting of oil revenues and thereby deplete Russian war financing. Although less dramatic, similar growth delinquencies appeared across the European collective. Replacing 40-45 percent of gas imports, 25-27 percent of crude and petroleum products and 46-50 percent of coal would prove costly and expand any fault lines in the ageing manufacturing businesses of countries such as Germany.

Europe has borne the brunt of oil weaponisation, even if it was itself much responsible for the phenomena. However, this had been cheered on and promoted by the United States under the Biden administration and it does not matter if one is right wing, left wing or non-binary wing, defunding the Kremlin’s war machine is as valid and noble a cause for sacrifice to be made. The US has enjoyed incredible success over the convening years since the war started because it was, and is, insulated by energy self-sufficiency from the pain Europe has had to endure. What then is President Trump’s deal to import Russian diesel and relaxation of export sanctions other than an inglorious spit in the eye to Uncle Sam’s closest allies? No matter that the 300k tonnes, expanding to 500k tonnes is only something like 1 and 2-days respectively of American usage, American money is about to fund another missile or drone which will land on an apartment block in a Ukrainian city. As for Ukraine, Volodymyr Zelenskyy would do well to never enter the bear pit of the White House again. Trump is sizing him up as the fall guy for high US diesel prices because of Ukraine strikes on Russian refineries. It seems the US President does in fact care about the mid-term elections and seeks to lay blame for record forecourt prices anywhere other than the Iranian war. Kyiv just became even more removed from possible US sympathy, and the Kremlin must be delighted.

Putin plays Trump like a harp, curiously and sadly The Donald knows it and cynically does not care, and whatever tune entitled ‘there will be a refrain on attacks on energy infrastructure’ rings out as a peace overture, the Ukrainian President said he had not heard it, and the Russian President has already forgotten it as Russia yesterday hit a power plant in Kharkiv, and according to the ‘BBC’, five other energy sites. It also prompted a sharp comment from Zelenskyy while attending the Warsaw security conference that Putin “does not read Truth Social.” The is the very same conference where US General Alexus Grynkewich, NATO’s Supreme Allied Commander Europe, spoke in Poland to outline NATO's "theory of victory" and warn Russia against further aggression. Strange how that aggression which might fall upon General Grynkewich to defend could be in part funded by his President. Obfuscate, feint and blarney are all tricks of the trade while the rest of the world picks up the tab for Mr Trumps self-proclaimed international intrepidness. American duplicity in the Ukraine war is likely to help turn the conflict into a generational affair and if we ever thought that the price of oil had limits as a weapon, we best think again. 
 

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