‘The center will shift’

‘The center will shift’

Mikhail Katkov

The European Union and the United States are imposing more and more new sanctions, and the question arises how far the West is ready to go. In 2017, Igor Morozov, a member of the Federation Council Committee on International Affairs, proposed not to supply Moscow’s ill-wishers with metals and components for the nuclear industry. Five years have passed – and now the American corporation Boeing itself announces the suspension of purchases of Russian titanium, on which it depends by 35 percent. Will they find an alternative there and how it threatens manufacturers, RIA Novosti understood.
The VSMPO-Avisma c-ompany, which until now was considered the main supplier of titanium for B-oeing, plans to compensate for the damage through n-ew markets. The metal is mainly used in the aerospace industry. But VSM-PO-Avisma is counting on an increase in supplies for medicine, the food industry and household needs.
Boeing buys most of its titanium from the US, Jap-an, China and Kazakhstan. But for the production of aircraft, until now, mainly metal from Russia has been chosen. Nevertheless, the American corporation assu-res that they will compens-ate for all costs. A lot of R-ussian titanium is also bo-ught by the French aircraft manufacturer Airbus (65% of needs), and the Brazilian conglomerate from the same sector Embraer (100-%). But they haven’t given up on their services yet.
Russia is one of the larg-est suppliers of metals: the share of titanium, palladiu-m and platinum in world exports is up to 30%. And the more the West presses, the higher the prices. For e-xample, on March 7, palladium set a record value, ex-ceeding $3.4 thousand per ounce.
A week earlier, it bec-ame known that the palladium producer Norilsk Nic-kel (which accounts for about 40% of the world’s volume) cannot deliver the goods to customers on time due to interruptions in air traffic. As you know, after the start of the special operation in Ukraine, some We-stern countries closed the airspace for Russian aircraft. At the same time, airlines were required to re-turn the leased aircraft to their owners. Russia resp-onded symmetrically, and its carriers stopped all foreign flights.
At the same time, the key consumer of Norilsk Nickel’s palladium and cobalt, the German concern BASF, announced that it would fulfill all its obligations to the Russian partner, but would not launch new projects. The companies have been cooperating since 2018, thanks to which the Germans built a plant in Finland that is capable of producing 300,000 electric vehicles annually. The project is estimated at $400 million. In turn, Norilsk Ni-ckel in Finland was going to expand the production of raw materials for batteries from the current 65,000 tons to more than 100,000 tons in 2026. The plans were in line with the growing European demand for batteries. Aluminum also set a record over the past holidays: $4,000 per ton. As in the case of palladium, the main reason is the gap in the supply chains from Russia to the global market. RUSAL (which accounts for six percent of the world’s production of this metal) can no longer ship products – the largest container lines and key European ports have refused to cooperate. In addition, gas prices range from two to four thousand dollars per cubic meter, and blue fuel is just what is needed to create aluminum.
While Russia and Weste-rn countries are counting who will suffer the most d-ue to sanctions, Chinese investors are eyeing shares in Russian energy and gas corporations. According to Bloomberg, Chinese state-owned companies China N-ational Petroleum Corp (C-NPC), China Petrochemical (Sinopec), China Alumi-num and China Minmetals may purchase shares in R-USAL and Gazprom. Age-ncy analysts suggest that this will accelerate Mosc-ow’s turn to the East.
According to the British National Institute of Economic and Social Research (NIESR), due to the Russian-Ukrainian conflict, the global economy will shrink by one percent in a year. It’s about a trillion dollars. This will also lead to problems in the supply chains of titanium, palladium and other metals.
Economist Mikhail Belyaev believes that the sanctions are politically motivated and are due to the fact that Russia is trying to destroy the unipolar world system that is beneficial to the United States. That is why Washington, its allies and the corporations they can influence put so much pressure on Moscow. Nevertheless, the expert believes, the West is unlikely to implement the measures in full: the countries that introduce them can themselves suffer greatly.
But if the restrictions continue throughout the year, the consequences will cover the whole world. “The economic centers will shift to China and India. This process has been going on before, now it will accelerate. The economies of the United States and the EU countries will stop developing. It is difficult to calculate the options, but it is clear that it will be difficult,” Belyaev is sure.
In turn, industrial expert Leonid Khazin, using the example of Boeing, shows how the situation will cha-nge: “Even if they really h-ave titanium reserves, they will only last for a few mo-nths. Deliveries from the USA, China or Japan are unlikely to replace Russian exports, which satisfied a third Boeing needs. Firstly, it will not be possible to quickly increase production. Secondly, each supplier has its own product line.”
The quality of the alternative may be lower, but the price will definitely be higher. And, as Khazin believes, the American corporation will pay: it needs to fulfill the plan for the production of aircraft. And the Russian company is reorienting itself towards cooperation with China, especially since there is already a common project for the construction of wide-body aircraft, says Andrey Kochetkov, a leading analyst at the Otkritie Investments global research department.
He considers the disruption in the supply of metals a very serious problem: “The world cannot do without Russian palladium and cobalt. In the first case, we have 40% of world production, and in the second we generally dominate. Europe will be left without batteries if it refuses our raw materials. Therefore many companies announce not a break, but a suspension of cooperation.” The expert draws attention: the United States imposed a ban on the purchase of Russian oil and gas, but did not touch uranium, because without it, American nuclear power plants would stop.
At the same time, if Russia itself restricts supplies, it will harm itself by abandoning the source of foreign exchange earnings. As Kochetkov suggests, in the future, when the acute phase of the political crisis is over, Moscow can use the reserves to bargain over the return of high technologies to the country.
However, it is already clear to all participants that the sanctions confrontation threatens the whole world: for some to a greater extent, for others to a lesser extent. And some might even benefit. But the international c-ommunity sees the prospe-cts and does not seek to cut off contacts forever – hopi-ng that one day politics will give way to economics.

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