It is also one of the world’s largest producers of diamonds, minerals and metals, such as platinum, nickel, aluminium, cobalt, copper and gold. The prices of these raw materials have been rising, but that is the least of it. The shortage of Russian raw materials could cause more bottlenecks in the supply chain in the United States.
For example, Russia is in first place in the production of palladium, an indispensable component of catalytic converters required to reduce polluting emissions from gasoline-powered cars, whose rising prices have already contributed to rising inflation in the United States. The Norilsk Nickel company, which could enter the list of sanctions by the West, is responsible for the extraction of much of the Russian palladium.
On Tuesday, German Chancellor Olaf Scholz suspended the natural gas pipeline Nord Stream 2 connecting Germany with Russia. But it will be difficult for lawmakers to come up with other sanctions and monetary policies that meet the West’s geopolitical goals without hurting the global economy.
Economics aside, Russia’s grievances with the West have already prompted a partial rapprochement with China. If this develops into a strong alliance, it would shift the balance of world power in a direction that generations of Western strategists have tried to avoid.
“This crisis is a trip back to the future,” said Ian Bremmer, president and founder of risk consultancy Eurasia Group, in a video chat from the Munich Security Conference last week. Russia’s actions have brought the world closer to a great-power military conflict than ever before since the end of the Soviet Union.
The possibility of a confrontation between NATO forces and Russia, with its nuclear arsenal, increases the risks of the Ukraine crisis beyond rational calculation.
Still, the markets will make those calculations anyway.
History teaches us that the tougher things get, the more valuable cash and Treasury bills seem. It also shows that Cold War supporters who clung to the stock market ended up with very large investment portfolios.