The invasion of Ukraine is a human tragedy for local populations. Far and near, the conflict is also causing significant tensions on price volatility and purchasing power in Europe. Switzerland is no exception to the rule.
It all comes down to three letters: AME
A is for Power
Ukraine is an important player in agriculture. Its agricultural production provides ingredients for poultry, pig and cattle feed, among other things, in Ukraine and beyond.
A lack of food for farm animals means a decline in the production of food products such as milk, cheese, pork, eggs, etc.
A drop in supply in the face of stable or even growing demand means price increases at points of sale.
Added to this is a drop in Ukrainian exports of corn, cereals, sunflower seeds, etc. The price of flour and various oils suffers as a result.
More worrying is the real lack of raw materials for poor countries in the Middle East and Africa.
We will have to deal with higher prices in our local supermarkets, but the situation can become dramatic for more vulnerable populations.
M for Metals
Nickel, Lithium, Cobalt... all metals that are essential for the manufacture of our devices. Electric car batteries, mobile phones, computers, household appliances... All of them require electrical components, including the famous semiconductors.
Ukraine is fertile ground for these types of metals, as is Russia for that matter. Both countries are already feeling the effects of the conflict, a drop in investment and a decline in industrial capacity.
This slump in supply exacerbates an already critical situation in terms of resources available to manufacturers around the world.
The pandemic has already been there, delays linked to structural problems in global supply chains persist, climate disasters have been devastating in some US producing states... The sum of all these events further strains an already volatile industrial situation.
The price of these devices has not increased in the same proportion as food, but the risk remains high.
Without sufficient financial capacity to deal with late deliveries, and therefore late payments; without cash to compensate for the loss of dormant equipment inventories... There is a risk of bankruptcy for many companies. This results in potential mass layoffs.
E is for Energy
As you may have noticed, the price at the pump continues to rise. Making a round trip from Lausanne to Geneva is starting to weigh heavily on the wallet.
The cost of heating is still reasonable. Thank you spring, thank you summer. It remains to be seen how countries that depend on Russian gas will manage to secure its supply and afford the new selling price this winter.
Here again, the game of supply and demand is in full swing.
In this case, it is Russia that has decided to limit its oil and gas exports in response to the sanctions taken by the West against the country's political forces.
Ironically, never before have the Russian authorities profited so much from revenues from oil and gas production. Not only do we suspect that the Asian market is somewhat compensating for the decline in European purchases, but the increase in prices is also massively compensating for the decline in export volume.
What's next?
No one knows; Will preventive measures and investment projects be sufficiently massive and rapid in their effects to control the rise? Experts doubt it.
As long as the war continues, the effects of the price for refueling your vehicle or filling up your oil tank will continue to be felt. The same applies if you heat your property with gas.
Bad news doesn't come alone, and the price of transporting goods is skyrocketing. The same applies to the cost of selling these same products. The effects of globalization are sometimes positive, as growth for developing countries is significant. The opposite is also true. The fall for these same countries can be brutal. Rich countries will find mechanisms to overcome a crisis; Other countries, which rely heavily on exports and tourism, will suffer more.
A glimmer of hope?
Not really. Even before the conflict began, inflation was real and global. In an attempt to reverse the curve, the US and European financial authorities decided to raise borrowing rates.
In short, money is more expensive, your daily purchases are more expensive, your trips are more expensive, your trips are more expensive, and sometimes you have to wait months before having an electrical appliance or a new vehicle delivered to you.
The end of the conflict, a prolonged period of political appeasement and a return to a semblance of normality in international relations... Here are the only options that allow us to anticipate the economic future with a little more serenity.
SOUL or SOUL?
And yet, in Switzerland, in Western Europe, there is peace.
Admittedly, the portfolio suffers a bit. Consumption choices are available to us. Eat less meat, less car trips, a closer travel destination... Is it really urgent to have the latest iPhone or Volvo?
Luxury choices.
Of course, we have the right to worry about our lifestyles, prices and constraints. For some, even in Switzerland, the situation can quickly change and precariousness can set in.
That said, nothing compares to what the local population in Ukraine is going through, or even what the families of Russian soldiers are going through under an avalanche of propaganda and lies.
So let us spare a thought for those people who do not have the choices that we have. Let us stand in solidarity with our neighbours in Switzerland who are suffering more, let us stand in solidarity with Ukrainians who are fighting for the survival of their nation and let us show compassion for all those suffering in this conflict.
Let our souls be benevolent, as those of the leaders, especially in Russia, do not seem to be.
‘We share the same biology, regardless of ideology
But what might save us, me and you
Is if the Russians love their children too.’
Sting - Russians | 1985
