Russia Ukraine conflict affects Spain - How the conflict between Russia and Ukraine affects Spain: The Spanish economy is in the first line of impact, according to Mapfre analysts.
The conflict between Russia and Ukraine has become the great threat of 2022 overnight, and Spain is on the front line of impact, as warned from Mapfre Economics.
"It is not a black swan, but it has become the most likely risk and with one of the most important macroeconomic impacts," warns the director of Macroeconomic and Financial Analysis of the Mapfre Research Service, Gonzalo de Cadenas-Santiago.
Russia could invade Ukraine at any moment. In Kyiv, the drums of war are already ringing: 100,000 Russian soldiers are deployed on the border with Ukraine and the US has already ordered the evacuation of some of its embassy personnel.
For Mapfre, this has become the most dangerous threat to the world economy and warns that in Spain the consequences may be worse than in other countries.
Russia Ukraine conflict affects Spain
Moreover, the bank has reduced its growth forecast for Spain by seven tenths in 2022.
First, because the price of oil is going to skyrocket, and Spain's enormous energy dependence will make this increase more expensive the price of products. Inflation, therefore, will continue to tighten in the coming months and weigh on the pocket of Spaniards.
Secondly, because of the delicate geopolitical balance that Spain must respect if it does not want the problems of energy supply to worsen.
It has been the hot topic of the last few months..
And it will remain so. It is getting harder and harder to make ends meet. In 2021, inflation increased by 3.1% in Spain, something not seen since the early nineties.
It is the rise in energy prices that has been pushing inflation up. Production costs for companies soar (a higher electricity bill, plus transport costs for gasoline...), which raises the price of goods sold and produced in Spain.
Tensions that generated Russia Ukraine conflict affects Spain
But the tension between Russia and Ukraine may cause the price of energy to soar even more. JPMorgan has warned that the conflict could lead to a cut in the oil supply. This would cause there to be less supply, with a demand that continues to increase, so that the price of crude could skyrocket by 75% in the coming months.
In this sense, "Spain has a structural weakness due to its high energy dependence", points out Cadenas-Santiago. 73.3% of the oil, gas and even electrical resources consumed by the country come from abroad, according to the INE.
This weekend an image went viral in which a worried Pedro Sánchez was seen “following very closely the situation in Ukraine".
No wonder, Spain must deal with a very thorny balance that makes it one of the most vulnerable economies to the conflict with Ukraine, according to Mapfre Economics.
Mapfre comments Russia Ukraine conflict affects Spain
Most European countries depend on Russian gas, and that is why there are many cautions, for example from governments such as Germany, when managing the conflict with Ukraine, since it has to control Russia but not upset it too much.
Spain, on the other hand, "is very interested in giving signals to the US that it supports its actions in the region, because it needs the support of the US to pressure Morocco," explains De Cadenas-Santiago.
At the same time, Spain depends on gas from Algeria, the main gas supplier to Spain. The problem is that Algeria is a country very much at odds with Morocco.
"Algeria and Morocco are at odds and Spain wants to be good with both. This poses an exceedingly difficult environment to overcome that can have a great implication in the supply of gas, which in turn can impact on inflation in the coming months and, therefore, demand and consumption," he adds.
