This is how one year of war in Ukraine has affected the economy

This is how one year of war in Ukraine has affected the economy The energy crisis has helped to take the consequences of the war out into the rest of Europe and the world - We were filled with tremendous seriousness, says Yara's deputy CEO.

The now one-year-old war of aggression has primarily had enormous human, social and economic consequences for people in Ukraine More than 7,000 civilians have been killed, and the UN assumes that the real numbers are significantly higher.

The fighting continues along the front in the east of the country According to the UN, eight million people have fled the country since Russia invaded on 24 February 2022, while over five million are said to be internally displaced in Ukraine.

The ripple effects of the war, not least the economic ones, can also be felt in the rest of Europe and other corners of the world - It was a day that filled us with a great deal of seriousness and great focus.

The immediate focus was to secure the life and health of our employees, says Deputy CEO Lars Røsæg at Yara on 24 February last year The fertilizer producer is among the Norwegian companies that have been close to several of the effects of the war.

Their sales office in Kyiv was hit by a Russian missile two days into the invasion None of Yara's employees were injured, but several civilians were nevertheless injured in the attack.

- At the same time, we were filled with tremendous seriousness regarding the inhumane suffering that took place in Ukraine, and the risk we understood this posed in the form of a food crisis being created in the future, when Russia had now invaded Ukraine, two major powers within the world food production, says Røsæg Energy prices right up to the weather Gas, electricity, sanctions, oil, food crisis, inflation, emergency aid and weapons are just some of the things that need to be included when looking back at the economic consequences of a year of war in Ukraine.

The Norwegian economy and Norwegian wallets are no exception - The challenge and the dilemma is that it has hit the wrong way.

Everything about primary needs is more expensive, such as electricity, food and housing costs It hits the weakest the hardest and leads to increasing inequality.

There is a real negative economic effect of the war, says Olav Chen, head of allocation and global interest at Storebrand There has been inflation in the word record when gas and electricity prices are discussed.

The word energy crisis has been hanging in the air in Europe since the end of 2021 The price of gas in Europe had already climbed sharply ahead of Russia's invasion, and continued up to the very highest peaks of over 300 euros megawatt hour in the late summer of 2022.

The price of oil also shot up In early March last year, a barrel of North Sea oil cost 133 dollars, the highest since the financial crisis in 2008.

The oil price has not been below 75 dollars a barrel since Ole R.

Hvalbye, commodity analyst at SEB, explains that the gas price had already been pushed up by increased activity in the economy after emerging from the pandemic When gas supplies from Russia began to be gradually reduced in the months before the invasion, "the run really started," according to the analyst.

At the same time, China imported a lot of gas in the months before the Beijing Olympics, which were held just before the war broke out - There were three unpleasant incidents at the same time, but it quickly turns into a pure war thing.

After the invasion, it has primarily been about Russian gas exports, says Hvalbye More Norwegian gas Russia was Europe's most important energy supplier before the war broke out.

Russian gas covered around 40 percent of the EU's needs, and accounted for half of what was imported After the invasion, the EU and other Western countries have imposed sanction after sanction against Russia, replenished their gas reserves, agreed on price ceilings for gas and Russian oil.

Towards the end of 2022, just over 10 percent of the gas imported into the EU came from Russia, according to the EU's figures Norway has passed Russia as the most important supplier even when looking at 2022 as a whole, and liquefied natural gas from countries such as the USA plays a much more important role.

Gas is an important energy source for industry in Europe, for households that use it for heating and cooking, and for power plants that create electricity The price drop in recent months is primarily about the fact that consumption and activity in industry are cut when you reach sky-high levels, according to Hvalbye.

- The levels we got this summer were as unsustainable as it is possible to be Then you have companies that go out of business, says the analyst.

Yara: - Worried about food crisis Russia was not only Europe's largest supplier of gas The country is also the world's largest supplier of the raw materials needed to produce fertiliser.

Deputy CEO Røsæg points out that Yara was early in condemning the invasion of Ukraine At the same time, they were also concerned with bringing out some of the major dilemmas that the invasion represented for the world's food industry.

- We spent a lot of time discussing that We were keen to highlight that issue and the great dilemma it posed that Russia is a major player in the world's food chains, says Røsæg in Yara.

- We were worried that the world was heading into a food crisis The months that followed have unfortunately shown that it was right.

The first days and weeks after the invasion were full of dilemmas, says Røsæg - Should one say that the world's food chains should be completely decoupled from Russia immediately? Or say that these connections can threaten food security in the short term, and therefore we have to look at these things against each other? Enormous profits On the other side of the extreme energy and commodity prices, there are enormous incomes.

And in this country, money has been raked in Norway exported a historically high NOK 2,601 billion last year, which produced a trade surplus of NOK 1,574 billion.

Gas accounted for almost half of the record export earnings The oil companies have made large profits.

Equinor delivered the biggest ever Norwegian annual result in 2022 due to the high oil and gas prices, with a profit of a staggering NOK 766 billion It also means large dividends for the owners, including the Norwegian state.

Yara also had good results last year The profit after tax for the whole of 2022 corresponds to more than NOK 28 billion.

- We already said on 1 March 2022 that in the short term a pressured food market can lead to higher prices, which in turn is increased earnings for Yara And Yara has had a year with good financial results, says Deputy CEO Røsæg.

- At the same time, we are clear that it is not a reality we wanted It is about the fact that high food prices cause increased conflict in the world, it causes increased migration, lower economic stability.

It's not good for anyone Here, the business and socio-economic perspectives coincide, he points out.

- We have felt a responsibility linked to the earnings we have had It is about contributing with fertiliser, and we have donated approximately half a billion kroner worth of fertilizer over the past three years.

And we have felt a responsibility to keep our production going Electricity price records in a row Electricity prices have stolen the headlines in this country when it comes to the consequences of the energy crisis on people's wallets.

The gas price helps set the electricity price in Europe This in turn affects the electricity price in southern Norway, because these three price areas are connected to the continent through several foreign connections.

The power price of around two kroner per kilowatt hour on average in southern Norway in 2022 is a clear record The wartime gas prices are not the only thing that has driven up Norwegian electricity prices, but are consistently highlighted as a central reason.

- I can agree that Putin's war has brought about a shift in the energy market If you think the electricity price has made a permanent shift, households and businesses must eventually adapt to it.

You cannot subsidize structural changes permanently if you want to have a market economy, says Olav Chen The Norwegian authorities have spent a lot of money to stem the sky-high electricity prices.

Just the electricity support for households when prices are high, which is the most expensive measure, is estimated to cost more than 70 billion in total in 2022 and 2023 But public money has not only gone to electricity measures after the outbreak of war.

Norway gave NOK 10 7 billion in civil and humanitarian or military support to Ukraine in 2022.

From 2023, the government will give NOK 15 billion a year for five years - a total of NOK 75 billion - to Ukraine Half goes to military purposes, including tanks and ammunition.

- The cost of the war is much greater than what Sp and Ap together had as election promises in autumn 2021, said Finance Minister Trygve Slagsvold Vedum at a seminar this week, pointing out, among other things, that 75,000 refugees from the war are expected in Norway in 2022 and 2023 Inflation before invasion It's not just energy prices that have risen sharply in the past year.

Price growth in many places around the world has reached levels not seen for decades In Norway, the most recent inflation figures showed that price growth was seven per cent in January.

Naturally, more expensive electricity, gas and fuel come into play here Ukraine, historically referred to as "Europe's granary", also plays a role in the price jump for wheat and grain products.

But Olav Chen does not agree that the war can be used as an excuse for the general rise in prices that has been seen - In the US, 80-90 per cent of the rise in inflation came before the invasion, so here you can't blame it.

In the eurozone, more than half of the price rise was already the case before the war in Ukraine, Chen points out - I can buy that energy prices have increased price growth, especially in Europe.

But the main reason why inflation increased is that the authorities, both governments and central banks, pushed on with support measures during the pandemic and pulled in the crisis policy far too late, says Chen The biggest economic uncertainty going forward is a possible escalation of the great power rivalry, he believes.

- What I am afraid of in terms of geopolitics is that China will be drawn in more and that the USA will be drawn in more The war in Ukraine may accelerate and intensify the bifurcation of the global economy.

But the main reason why inflation increased is that the authorities, both governments and central banks, pushed on with support measures during the pandemic and pulled in the crisis policy far too late, says Chen The biggest economic uncertainty going forward is a possible escalation of the great power rivalry, he believes.

- What I am afraid of in terms of geopolitics is that China will be drawn in more and that the USA will be drawn in more The war in Ukraine may accelerate and intensify the bifurcation of the global economy.

But the main reason why inflation increased is that the authorities, both governments and central banks, pushed on with support measures during the pandemic and pulled in the crisis policy far too late, says Chen The biggest economic uncertainty going forward is a possible escalation of the great power rivalry, he believes.

- What I am afraid of in terms of geopolitics is that China will be drawn in more and that the USA will be drawn in more The war in Ukraine may accelerate and intensify the bifurcation of the global economy.

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