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UKRAINE

How Spain could be impacted by Russia’s invasion of Ukraine

Russia’s invasion of Ukraine on Thursday could have a considerable impact on Spain's economy, with the price and supply of energy and certain food products already affected.  

How Spain could be impacted by Russia's invasion of Ukraine
People stand by the body of a relative stretched out on the ground after bombings on the eastern Ukraine town of Chuguiv on February 24, 2022. Russia's invasion of Ukraine could have far reaching consequences for Spain's economy and Europe's. (Photo by Aris Messinis / AFP)

At four in the morning (GMT+1) on Thursday February 24th, explosions started to be heard in several Ukrainian cities, in what Vladimir Putin has described as a “large-scale operation” to defend the Ukrainian independence fighters in the Donbas region.

Ukrainian authorities have already reported the first casualties and announced that Russia has launched a “full-scale invasion” of the country, in the words of the Ukrainian foreign ministry with the aim of “destroying the Ukrainian state”.

“The Government of Spain condemns Russia’s aggression against Ukraine and expresses its solidarity with the Ukrainian Government and people,” Spanish Prime Minister Pedro Sánchez tweeted on Thursday, adding that he was in “close” contact with Spain’s EU and NATO partners to coordinate a response to the attacks.

It’s a harrowing situation for the 44 million inhabitants of the eastern European nation and an unnerving scenario for the world as a whole as it tries to put a still ongoing global pandemic behind it.

According to a survey by Spanish social research group Instituto DYM, 56.3 percent of Spaniards are “fairly” or “very” worried about the potential of the conflict having an impact on life in Spain. 

The escalating war may seem far away for many here in western Europe, but how big an impact could the Ukraine-Russia conflict actually have on Spain?

Energy

In terms of the effect it could have on energy supplies, one of the biggest worries for European nations, Spain has an advantage in that it doesn’t depend on natural gas that comes from Russia, unlike the case for Germany, Hungary or the Baltic countries.

The gas that is imported from the region arrives by sea in large methane tankers that transport it in a liquid state.

According to Spain’s Strategic Reserves Corporation (Cores), in 2021 Spain imported 10.5 percent of its natural gas from Russia compared to 44 percent from nearby Algeria. 

That being said, the ongoing conflict between the north African nation and its neighbour Morocco did result in Algeria temporarily cutting supplies to Spain last year and could prove equally if not more troublesome for the Spanish economy in 2022.

But even if Spain may not be as affected by Russia’s invasion of Ukraine as other European nations, it couldn’t avoid the consequences of a general rise in energy and fuel prices throughout the continent.

This comes at a time when the price of electricity in Spain has risen by 46 percent on average in the last year, diesel is 25 percent more expensive and petrol costs 23 percent more.

Oil prices already surged on Thursday, with Brent breaching $100 a barrel for the first time since 2014 and very real fears that as the conflict in Ukraine unfolds consumers in Spain and elsewhere could be faced with scenarios similar to the oil crises of the 1970s.

Food 

Practically half of all maize imports to Spain are from Ukraine, and a large proportion of other grain consumed in Spain comes from the eastern European nation. This also includes 60 percent of the sunflower oil that Spain buys from overseas and 31 percent of vegetable oil.

Spanish agricultural website Agroinformación already reported an increase in price of wheat, barley, oatmeal and rye as the conflict escalated. 

Russia’s confirmed invasion of Ukraine is certain to drive prices up further and create more volatility. As a precedent, when Russia invaded Crimea in 2014, cereal prices rose by 20 percent. 

A reduction in debt purchases and a rise in interest rates by the European Central Bank would mean economies with more public debt over GDP, which includes Spain, would feel the pinch especially. 

READ ALSO: The food products that are more expensive than ever in Spain

Troops

There are currently 800 Spanish NATO soldiers deployed at the border between Russia and Ukraine. 

A survey by Spain’s Elcano Royal Institute for International and Strategic Studies found that 48 percent of Spaniards were actually in favour of Spain participating in NATO operations in the conflict, particularly men over the age of 45 with right-wing political views. 

Even though Madrid will be hosting a NATO summit in late June, Spain is still considered a medium military power on the international sphere and Defence Minister Margarita Robles has so far not suggested that more troops will be sent to assist Ukrainian forces.

However, Pedro Sánchez will attend an extraordinary European Council meeting in Brussels on Thursday and any decision on a coordinated intervention in the conflict will likely be accepted by the Spanish Prime Minister, given his eagerness for Spain to play a more pivotal role in both the EU and NATO.

EU nationals have so far not agreed on how to deal with the Ukraine crisis, with some sending military support to the country (Spain among them) and others pushing for a diplomatic solution.

READ ALSO: How much influence does Russia have over Spain?

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ECONOMY

Qatar to invest an extra €4.75 billion in Spain

Qatar on Wednesday said it plans to invest an additional $5 billion (€4.75 billion) in Spain on the second day of a state visit by its emir, Sheikh Tamim bin Hamad Al-Thani.

Qatar to invest an extra €4.75 billion in Spain

“The volume of investments agreed upon with the Spanish side amounts to $5 billion in various sectors,” said Qatari Foreign Minister Mohammed bin Abdulrahman Al-Thani in a statement tweeted by his ministry.

Neither side gave a timetable for the investment, which amounts to some €4.75 billion, nor did they say which sectors would benefit.

“Qatar will invest close to five billion euros in our country in the coming years,” Prime Minister Pedro Sánchez said during a business meeting with the Qatari delegation.

“It is a gesture of confidence in the Spanish economy and Spanish businesses which will strengthen bilateral ties,” he said ahead of afternoon talks with the emir.

Before the pandemic, Qatari investment in Spain stood at €2.67 billion ($2.8 billion), the Spanish government said, making it the country’s 24th biggest investor.

To date, Qatari funding has been notably invested in several sectors: civil aviation, construction, energy and communications.

According to a Spanish government source, the two sides will on Wednesday sign around a dozen commercial contracts, notably concerning energy as Madrid seeks to diversify its gas supplies following Russia’s invasion of Ukraine.

Qatar, one of the world’s three biggest exporters of liquified natural gas (LNG), is currently Spain’s fifth-largest supplier after the United States, Algeria, Nigeria and Egypt.

The country accounted for 4.4 percent of Spain’s total gas imports in April and the Spanish government hopes to increase this share.

European states are increasingly looking to other sources of natural gas as they try to wean themselves off dependence on Russia, with LNG easily shipped by boat from countries such as Qatar and the United States.

After Madrid, the Qatari leader will continue his tour of Europe, visiting Germany, Britain, Slovenia and Switzerland, where he will attend the World Economic Forum in the mountain resort of Davos which runs from May 22-26.

Qatar will host the World Cup later this year.

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