In my comment for the January-February issue, I quoted the WEF’s Klaus Schwab’s introduction to Davos 2022: “… major global challenges await us, from climate change to rebuilding trust and social cohesion. To address them, leaders will need to adopt new models, look long term, renew cooperation and act systemically,” said Schwab. The very noble Davos agenda aimed to highlight and promote issues such as sustainability, governance, collaboration, impacts on our planet and the prosperity and wellbeing of employees and communities.
Then on February 24, Russia began an open military invasion of Ukraine and, while this war actually began in 2014 when Russia annexed the Crimean Peninsula from Ukraine, this escalation is disrupting the World order in ways not seen since World War II.
The destruction of Ukraine’s cities: most notably Mariupol and Kherson in the South, Kharkiv in the East and the capital, Kyiv, is being broadcast to horrified viewers across the globe. City power plants, oil depots, bridges airfields, factories and residential areas and even the decommissioned Chernobyl nuclear plant have been (and continue to be) shelled – while the outside world looks on in helpless horror.
How quickly humanity descends into mindlessly trashing our world. Apart from the personal tragedies of millions of directly affected people and the destruction of the environment that must be making the likes of Greta Thunberg weep with frustration, the economic repercussions are likely to affect almost everyone on the planet.
Due to effects of sanctions against importing Russian oil and gas on global markets, prices are soaring, which is already having an impact on the petrol prices at pumps and on fuel gas prices for those, particularly in Europe, using piped gas for heating their homes. Petrol prices in South Africa are already over R21/ℓ and are predicted to potentially hit R40/ℓ by April. In the UK, prices have already reached £1.60/ℓ – over R32/ℓ.
But Europe’s dependence on directly piped Russian gas is causing even more alarm. Germany, as consequence of aversion to nuclear power and championing renewable energy, imports Russian gas to meet nearly a third of the domestic heating needs of the German population. Nord Stream II, the now complete €10-billion pipeline project to carry gas from the Russian coast near St Petersburg to Lubmin in Germany has now been ‘frozen’ by Germany as a result of the war. In addition, Europe as a whole has committed to reducing its dependence on gas from Russia by two-thirds by the end of 2022 – and entirely by 2030.
Meanwhile, however, there is the uncomfortable sense that the rising prices European importers are paying are helping Russia to fund its war.
Africa’s response? No African country has yet declared direct support for the Russian invasion. South Africa, a member of BRICS with strong economic ties to Russia, has called for the immediate withdrawal of Russian troops from Ukraine, saying the dispute should be resolved peacefully. “Armed conflict will no doubt result in human suffering and destruction, the effects of which will not only affect Ukraine but also reverberate across the world. No country is immune to the effects of this conflict,” reads the formal South African government statement.
With South African investments in Russia amounting to nearly R80-billion and Russian investments in South Africa total around R23-billion, Cyril Ramaphosa is, undoubtedly, in a difficult position. South Africa recently abstained from the UN vote condemning Russia’s military invasion of Ukraine. Explaining his reasons, Ramaphosa said the resolution failed to include a call for meaningful engagement. “In a world where far too many disputes between countries are settled through the barrel of a gun, South Africa expected the UN to call for peaceful negotiations,” he said.
Martin Kimani, the non-permanent member for Kenya on the UN Security Council, was a little more critical: “The territorial integrity and sovereignty of Ukraine stands breached. The charter of the United Nations continues to wilt under the relentless assault of the powerful,” he said.
In terms of damage limitation, it seems more obvious than ever that the world needs to urgently reduce its dependence on oil and gas, particularly imports. New technologies such as green hydrogen could – and should – play an increasingly important role, with the levelised cost equations becoming increasingly favourable as oil and gas prices rise.
Also, though, there may well now be better business case arguments for investments into more of the African continent’s oil and gas resources: to reduce our dependence on imports, volatile prices and exchange rates, and uncomfortable political compromises.
This war, like all others, will impair the quality of life for a majority of people across the world. The input costs for businesses and industrial plants will increase. We all need to tighten our belts, use more efficient technology and adopt every lean, circular and sustainable strategies we can to minimise its impact.
“Major global challenges” are certainly awaiting us!
