Day: January 2, 2023

What does data tell us about the secondary effects of the 2022 Russian invasion of Ukraine on economies in the Middle East, Africa, and Asia

OVERVIEW

This report provides a commentary on relevant datasets (mainly on food prices and food inflation) as it examines trends related to the economic effects of the 2022 Russian invasion of Ukraine on selected countries in the Middle East, Africa, and Asia. ACAPS assessed publicly available information and data on the economic impacts of the war resulting from supply chain disruptions, comparing different sources and datasets and highlighting any similarities or contradictions. The methodology behind the datasets and analyses assessed was considered in the commentary, whenever available.

ACAPS has cross-checked information shared in media articles and reports by humanitarian organisations with data analysis findings to determine whether the economies of selected countries were truly impacted by the effects of Russian invasion of Ukraine on global supply chains and to what extent. Many countries in Africa, Asia, and the Middle East have shown an increase in commodity prices following the start of the invasion, but this increase has either lasted between March–May only or followed the price trends observed for the same period in previous years. Only the economies of a few countries stood out as having truly been affected by the conflict in Ukraine: highlighted in this report are Lao and Zimbabwe.

Many of the secondary data sources that ACAPS has looked at for this report only provided an analysis of the period following the start of the invasion on 24 February, without taking into account price trends over the years and pre-existing humanitarian crises and challenges that countries in Africa, Asia, and the Middle East have already been facing for years.

Source: ACAPS

For decades, if not longer, intelligence agencies worldwide have worried about disinformation, whether from adversaries or their own efforts to influence others.

It was persistent, and at times pitched, though it was not often on the minds of everyday people.

In 2022, however, that seems to have changed.

“In this age of misinformation — of ‘fake news,’ conspiracy theories, Twitter trolls and deepfakes — gaslighting has emerged as a word for our time,” the Merriam-Webster English language dictionary announced in November, naming it the official word of the year.

Online searches of the word, which means “the act or practice of grossly misleading someone especially for one’s own advantage,” jumped by 1740% throughout the year, the dictionary said, noting consistent interest in the word and modern efforts at deception.

In the United States, such concerns consistently dominated the public discourse, starting with President Joe Biden’s appeal to defend democracy on the first anniversary of the January 6, 2021, attack on the U.S. Capitol.

“Are we going to be a nation that lives not by the light of the truth but in the shadow of lies?” he asked.

“We cannot allow ourselves to be that kind of nation,” Biden said. “The way forward is to recognize the truth and to live by it.”

The U.S. president’s comments came just weeks after U.S. Homeland Security officials warned of ongoing — and more volatile — efforts by foreign intelligence services and terrorist organizations to seed the country with disinformation.

And those concerns grew as Russia prepared for its invasion of Ukraine.

Russia – Ukraine

“We’re seeing Russian state media spouting off now about alleged activities in eastern Ukraine,” U.S. Defense Secretary Lloyd Austin told reporters in late January, as 100,000 Russian troops took up positions along Ukraine’s border.

“This is straight out of the Russian playbook,” Austin said of the Russian disinformation efforts. “And they’re not fooling us.”

By mid-February, senior U.S. Homeland Security officials were warning that Moscow had fine-tuned its disinformation operations, “trying to lay the blame for the Ukraine crisis and the potential escalation in that conflict at the feet of the U.S.”

Russian disinformation efforts took another turn in the days following the invasion, according to U.S. defense officials, with the Kremlin publicizing false reports about the widespread surrender of Ukrainian troops to erode Ukrainian morale and resistance.

Russian-government affiliated news outlets also sought to use the war in Ukraine to boost Moscow’s standing in Africa, amplifying accounts in late February and early March of Africans and other people of color being subjected to racism as they sought to evacuate.

Other Russian disinformation campaigns focused on claims the U.S. was running biological weapons labs in Ukraine and on efforts to undermine Western support for Ukraine by targeting countries perceived as weak links.

Countercampaigns

Russia’s disinformation efforts and influence campaigns, however, did not go unanswered.

Even before the first Russian troops crossed the border into Ukraine in February, U.S. intelligence officials made a decision to fight disinformation with evidence and facts, taking the unprecedented step to declassify assessments to share with allies and even the public.

“The work that we’ve done, and it’s not without risk as an intelligence community to declassify information, has been very effective,” CIA Director William Burns told lawmakers in early March.

“We hopefully can provide some credible voice of what is actually happening,” added U.S. Director of National Intelligence Avril Haines. “That’s both for the domestic population, but that’s also for the international audience.”

Other Western countries and allies of Ukraine followed with pushback of their own.

In early March, the European Union banned broadcasts and websites affiliated with Russian state-funded media outlets.

Ukraine also ran its own counter-disinformation efforts, targeting audiences in Russia and Belarus, hoping to sow doubts and erode support for Moscow’s invasion.

“I’m not realistic about changing their minds,” Heorhii Tykhy, with Ukraine’s Foreign Ministry, said during a virtual forum in March, though he added that overall, Kyiv was “winning this information war and winning it massively.”

U.S. domestic fears

At the same, the U.S. intelligence agencies and their Western allies were focused on Russia’s disinformation efforts surrounding Ukraine, U.S. Homeland Security efforts were focused on disinformation at home.

In June, the Department of Homeland Security (DHS) reissued a National Terrorism Advisory System (NTAS) Bulletin, citing the pervasive disinformation environment, much of it originating in the U.S., as a key concern.

“It’s really the convergence of that myth and disinformation with the current events that creates those conditions that we’re concerned about in terms of mobilization to violence,” a senior DHS official said at the time.

Some of those fears had already manifested a month earlier when 18-year-old Payton Gendron, who consumed online conspiracy theories, shot and killed 10 Black people at a grocery store in Buffalo, New York.

Other acts of violence across the U.S., such as the shooting at a gay nightclub in Colorado in November, an attack against the husband of U.S. House Speaker Nancy Pelosi and a rash of threats against religious institutions, also had links of various sorts to the online disinformation environment.

“One of the things we’ve seen with violent extremist ideologies is that they often commingle or cross over,” a second senior DHS official said this past November. “It just contributes to an environment where individuals … might grab on to those narratives in a way that motivates and animates their violent or potentially violent activity.”

U.S. elections

Some of the most targeted disinformation efforts, though, centered on the U.S. midterm elections in November.

“We are concerned malicious cyber actors could seek to spread or amplify false or exaggerated claims of compromise to election infrastructure,” a senior FBI official said in early October.

Other senior U.S. officials warned that adversaries like Russia, China and Iran would seize upon false narratives, originating in the U.S., questioning the integrity of the electoral process, and seek to amplify them.

Researchers also found evidence that Russia and China, in particular, had resurrected dormant social media accounts as part of intensified disinformation campaigns to spread doubts about the U.S. election.

And as the election neared, top U.S. officials called the threat of foreign influence operations and disinformation sparking violence a “significant concern.”

In the end, fears of potential violence never materialized into actual incidents, though U.S. officials did find themselves pushing back against domestic and largely partisan efforts to take scattered malfunctions and cast them as evidence of a larger conspiracy.

A report by the cybersecurity firm Mandiant concluded that in the end, efforts by Russia, China and Iran, some targeted specific contests but were mostly “limited to moderate in scale.”

A number of experts warn the threat of election disinformation is here to stay.

Future disinformation threats

“Narratives like the Big Lie have become systemic,” Graham Brookie, senior director of the Digital Forensic Research Lab at the Atlantic Council, said about former President Donald Trump’s disproven claims that the 2020 U.S. presidential election was stolen from him.

“[There is] not a huge amount of audience growth on that narrative, but for the audiences and communities that are engaged in and believe in that narrative, their engagement has gone up and become more hardened,” Brookie told VOA.

Some U.S. lawmakers are likewise warning the threats are not dissipating.

“After each election cycle, social media platforms like Meta often alter or roll back certain misinformation policies, because they are temporary and specific to the election season,” Democratic Representative Adam Schiff, chair of the House Intelligence Committee, and Democratic Senator Sheldon Whitehouse wrote in a letter to the social media giant December 14.

“Doing so in this current environment, in which election disinformation continuously erodes trust in the integrity of the voting process, would be a tragic mistake,” they added. “Meta must commit to strong election misinformation policies year-round, as we are still witnessing falsehoods about voting and the prior elections spreading on your platform.”

Other lawmakers are looking at social media apps from China and Russia, calling for some, such as TikTok, to be banned in the U.S.

“TikTok is digital fentanyl that’s addicting Americans, collecting troves of their data, and censoring their news,” Republican Representative Mike Gallagher said in a statement regarding a bill designed to block such apps.

“This isn’t about creative videos,” Republican Senator Marco Rubio, vice chair of the Senate Intelligence Committee said in a statement regarding TikTok.

“This is about an app that is collecting data on tens of millions of American children and adults every day. We know it’s used to manipulate feeds and influence elections,” he said. “We know it answers to the People’s Republic of China.”

Source: Voice of America

In the European Union this winter, fears of rolling blackouts triggered by Russian energy export cuts amid Moscow’s war in Ukraine have subsided thanks to good luck, good weather, and quick action.

A warm start to the heating season in October and November enabled the EU to slash natural gas consumption and store more fuel for the winter months. Meanwhile, slumping Chinese demand due to COVID lockdowns allowed liquefied natural gas (LNG) tankers bound for Asia to be rerouted to the bloc.

EU officials also played a role, encouraging countries to cut consumption, improve efficiency, and boost alternative energy supplies to help offset the drop in supply.

But luck can run both ways. A reversal of this year’s fortunes, combined with further natural gas export cuts by Russia, could leave Europe with insufficient energy supplies and skyrocketing prices next winter, analysts say.

“If pipeline imports to the European Union from Russia drop to zero in 2023 and Chinese LNG demand rebounds to 2021 levels, then the European Union faces a serious supply-demand gap opening up in 2023,” the International Energy Agency (IEA) said in a December 12 report.

“In the short run, Europe is in a difficult predicament,” Agathe Demarais, the global forecasting director at the Economist Intelligence Unit, wrote in Politico in November, adding that the situation could worsen next winter.

“But in the long run, Russia simply can’t win this energy war,” she wrote.

The IEA estimated that the EU gas deficit in 2023 could be as high as 57 billion cubic meters (bcm), or nearly 15 percent of its forecast demand, though it said measures currently being implemented — such as new solar and wind projects — should cut the shortfall to 27 bcm.

The EU could cover the remaining gap if it immediately invests an additional 100 billion euros ($107 billion) to expand alternative energy projects and boost energy efficiency, the IEA estimated.

Natural gas is largely used to heat homes and buildings, fuel power plants, and run industrial processes, such as the production of fertilizers. A shortfall would lead to high and volatile energy prices in the EU, triggering industrial and household demand destruction and energy rationing.

Some nations have already put contingency plans in place should a crisis arise.

Much depends on what the Kremlin does — or doesn’t — do.

From 60 To Zero

Russia had been the largest supplier of natural gas to the European Union, accounting for nearly 40 percent of the bloc’s demand in 2021, giving Moscow enormous leverage over the EU’s energy sector.

And it was quick to use that power after unleashing its massive invasion of Ukraine in February, seeking to undermine Western unity and support for Kyiv by sharply curtailing gas exports to the bloc and driving prices to record highs.

Russian natural gas exports to the EU via pipeline are forecast to fall to about 60 bcm this year compared with 140 bcm last year and nearly 200 bcm in the pre-Covid year of 2019.

Despite the worst relations in decades between Moscow and the West, Russia is still supplying the EU with gas via pipelines that run through Ukraine and Turkey while also shipping LNG to the bloc.

But the Russian pipeline exports may be further curtailed or stopped altogether in 2023, some experts fear, forcing Europe to hunt for gas in a world with limited options.

Russia is currently supplying about 25 bcm on an annualized basis to the EU, according to the IEA. About two-thirds of that comes via Ukraine, where fierce fighting continues.

“With the Ukrainian pipeline, I think there is a risk of either accidental damage or intentional damage,” Nadia Kazakova, an analyst at Renaissance Energy Advisors in London, told RFE/RL.

She said Russian exports via Turkey should continue unless the Kremlin determines that a complete shutdown of pipeline gas to the EU is politically and militarily expedient.

“They will keep pumping until they go all-out in Ukraine,” she said.

Chris Weafer, a Russia energy expert at the Moscow-based Macro Advisory, said he doesn’t expect Russia to cut gas volumes to Europe any further because it needs the cash and can’t sell the pipeline gas to other markets due to a lack of infrastructure.

Russia earned bumper export revenues during 2022 as commodity prices surged but the money has largely gone toward financing the war, now in its 11th month with no end in sight.

And the outlook for Moscow’s export revenue in 2023 looks substantially worse. Oil, Russia’s main export commodity, has already tumbled from a high of $130 reached in March to just above $80, near a one-year low.

Russia is selling its oil at a sharp discount to market price due to Western sanctions.

Game Of Chicken?

Exports of oil and refined products made up about 34 percent of Russia’s federal budget revenue this year, with gas accounting for about 10 percent, according to Elina Ribakova, an economist at the Washington-based Institute of International Finance.

Russia is expected to post back-to-back budget deficits in 2022 and 2023 of around 2 percent, forcing the Kremlin to tap its so-called “rainy day” fund to cover the shortfall.

Russia “will need at least current gas export volumes because it will need to try and keep the budget deficit as low as possible,” Weafer told RFE/RL.

But the reliance still cuts both ways, at least for now.

Europe and Russia “have managed to reduce gas dependency on the other this year but volumes are now down to critical levels,” Weafer said. “Neither can afford for gas volumes from Russia to Europe to drop any further in 2023, and probably also 2024.”

The EU actually imported more Russian LNG in 2022 than the previous year as it struggled to find alternatives to Russian pipeline gas.

“LNG from Russia is politically more acceptable to Europe…it allows Brussels to say it has options and not stuck with Russian risk. The reality is not so clear,” Weafer said.

The EU largely covered the Russian gas shortfall of 80 bcm by importing more LNG from the United States and Middle East, switching to coal, and enhancing energy conservation.

However, surging energy prices did cause about 10 bcm of industrial demand destruction, the IEA said.

LNG Competition With China

To offset the drop in Russian pipeline gas, the EU imported about 50 bcm more of LNG in 2022. That would have been a lot harder to do had China not locked down its economy to combat COVID.

China more than tripled its purchases of LNG from 2016 to 2021, making it the world’s largest importer of the fuel last year. It had been forecast to import even more in 2022, but the lockdowns ended up slicing demand by 20 bcm, allowing LNG cargoes to be rerouted to the EU.

Europe may not be so lucky in 2023. China has eased its lockdowns and its demand for LNG could return to 2021 levels, leading to competition with Europe for spot cargos, experts say.

“We could see Europe struggling to attract enough volumes of LNG to refill the storages ahead of next winter,” Carlos Diaz, an analyst at the Oslo-based Rystad Energy, told RFE/RL.

To make matters worse, there will be little growth in non-Russian pipeline or LNG supplies in 2023, Diaz said.

Norway, Azerbaijan, and the countries of North Africa — key exporters of pipeline gas to the EU — are already operating at or near capacity, he said. And the United States and Qatar won’t launch major new LNG export projects for another two years.

The EU could offset some natural gas demand in 2023 with an increase in hydropower production, but hopes that nuclear power would also rebound may not materialize, Diaz said.

EU consumption is heavily weather-dependent, he said, so how tough things will be next winter also depends on how warm or cold the rest of the current winter will be.

The EU had high storage levels of natural gas coming into December thanks to an unusually warm autumn, though a short-lived cold snap later in the month did cut those reserves.

The lower the gas storage levels are come spring, the more fuel the EU will have to purchase in a supply-constrained market to prepare for the winter of 2023-24, he said.

Should the rest of the winter season turn out “normal,” then the EU will exit the heating season with sufficient volumes in storage, “making it easier to refill to a comfortable level by the start of next winter,” he said. If it’s colder than normal, then the EU could still be in for a rocky ride.

“We still have three months of winter to go and storage levels have started to deplete at a fast rate, so it’s still not certain that this winter will be as comfortable as some have now come to expect,” Diaz said on December 20.

‘Gas Suicide’

In any case, though, analysts say that, while the EU may suffer in the short-term from the reduction of energy supplies due to the Brussels-Moscow showdown over the invasion of Ukraine, Russia is set to lose in the long-term.

“Moscow’s blackmail has, once and for all, convinced EU countries that Moscow isn’t a reliable energy supplier,” Demarais wrote. As Europe steps up efforts to drop its dependence on Moscow, “it’s starting to look like, within three years or so, Europe won’t need Russian oil and gas anymore.”

It’s a momentous change that could hardly have been predicted before Putin launched the large-scale invasion of Ukraine on February 24, even after years of tension between Moscow and the West.

“Russia’s gas business in Europe…is now all but dead,” Thane Gustafson, a professor at Georgetown University and author of several books on Russia’s energy industry, wrote in a December 12 blog post.

Russia has been exporting gas to Europe since the 1960s and the symbiotic relationship survived both the depths of the Cold War, the breakup of the Soviet Union in 1991, and Moscow’s rocky transition to a market economy.

By the 2000s, Russia’s position as the leading supplier of natural gas to Europe seemed assured for decades to come. Putin, who took power at the end of 1999, had agreed to invest more than $200 billion to develop new natural gas projects on Yamal Peninsula in the Far North for export to Europe.

To get the gas to market while avoiding transit through Ukraine, he ordered the construction of several new export pipelines, including Nord Stream 1 and 2 to Germany and TurkStream to Turkey.

Those investments helped Russia generate annual European gas export revenues of more than $50 billion in recent years. With European domestic gas production falling, Russia looked set to continue to reap a windfall from gas exports to the EU.

“European gas demand was projected to keep growing for at least another decade,” Gustafson wrote — but Putin’s decision to launch an invasion of Ukraine and his subsequent cutoff of gas exports to Europe has “dashed” the EU’s trust in the Kremlin “for a generation.”

The war has accelerated Europe’s transition away from fossil fuels to cleaner alternatives with the result that in five years’ time, Turkey will remain the “sole buyer” of Russian gas in Europe, he said.

“The final result is clear…. Putin has not simply committed gas suicide,” Gustafson wrote. “He has killed off the last half-century of entente along with it.”

Copyright (c) 2015. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave NW, Ste 400, Washington DC 20036.