Russian Energy Supplies (commodity exports)

MNCs should consider the impacts of three potential scenarios

The expected uptick in prices throughout Europe will be a cause of considerable pressure for MNCs and will increase price sensitivity among consumer segments. The possibility of a downside scenario will remain acute and may drive EU markets into a recession, as domestic demand is driven into contraction. The uneasy geopolitical situation in Europe and the persistent danger of a significant reduction of gas supplies to Europe will necessitate that MNCs revisit their short-term scenarios and consider their respective impacts on key customer segments.


Russia announced a ban on exports of over 200 products, most of which are manufactured products. The Russian government continues to work on a blacklist of commodity exports, with a reduction in gas supplies to Europe remaining highly likely. The ongoing conflict in Ukraine is set to also affect agricultural commodity exports into the EU significantly, translating into a pronounced surge in food inflation.

Our View

Inflation is set to accelerate substantially throughout 2022, but its pace will depend on the Russian government’s upcoming plans to introduce limits or suspensions on certain commodity exports to the EU. While the current list of banned exports is unlikely to have a substantial impact on the EU, cuts or disruptions to gas supply in Europe remain highly likely (at 50%) and are our base case. In such an instance, inflation will likely peak during May–July 2022 and will see a very gradual alleviation throughout H2 2022. The rate of inflation itself will vary substantially across individual markets, but the broad-based increase in the EU will ease domestic demand expansion substantially. The option to fully suspend gas supplies to Europe remains on the table (at 40%), and a prolonged disruption will likely cause a significant uptick in inflation that will drive the EU into a renewed contraction. In this scenario, inflation will quickly gain pace across the EU and peak in November–December 2022, likely reaching double digits between April and December 2022. Rapid de-escalation of the conflict remains unlikely at 10% and would be prompted by a drastic policy or regime change. However, even in this case some sanctions are likely to remain in place, while logistical and supply disruptions will continue to push producer prices substantially above headline inflation. In any of these three scenarios, EU governments are likely to introduce substantial revisions to their fiscal policies that will likely necessitate a long-term adjustment of the wider EU fiscal policy and have a significant impact on B2G demand. In any case, the ongoing conflict in Ukraine is likely to have long-term structural changes to the wider European economic context, making scenario planning an invaluable tool in MNCs’ arsenal.

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