Ukraine fallout
Caribbean interests deeply concerned about impact of Russia’s invasion on region
Published:Sunday | February 27, 2022 | 12:10 AM
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In recent weeks, even before Fitz Brown stopped at the petrol station, he would quickly work out how much fuel he could afford to put in his tank. With energy prices rising steadily, filling up was out of the question, the Guyanese taxi driver...
In recent weeks, even before Fitz Brown stopped at the petrol station, he would quickly work out how much fuel he could afford to put in his tank.
With energy prices rising steadily, filling up was out of the question, the Guyanese taxi driver told The Sunday Gleaner.
“To be honest, it is hard for a small man like myself to fill up. So, based on the operation you perform on a daily basis, you buy the amount of petrol that will keep you going,” Brown explained. And for Brown, it meant spending between US$10 and US$15 at the pump each day.
However, after Russia invaded Ukraine on Thursday, Brown, a former security officer, said he was concerned that the conflict would push oil prices up so sharply that he may be forced to seek employment opportunities elsewhere.
“It will affect me, but I have already made sure I put systems in place that if Plan A fails I have a backup plan,” he stressed. “If a man calls me, he got a little work, once it’s legal, I’ll go and push two, three days.”
The tensions over Ukraine had brought wide swings in energy prices, and soon after Vladimir Putin, the Russian president, recognised the independence of the Moscow-backed rebel regions of Donetsk and Luhansk in Eastern Ukraine on Monday evening, the price of oil surged nearly five per cent.
After the full-scale invasion began on Thursday, the price of crude topped US$100 a barrel for the first time since 2014. Brent crude, the global benchmark, jumped by 8.5 per cent to trade at US$105.40 per barrel by the early hours of Thursday morning.
Russia’s actions have received widespread condemnation, including from the Caribbean Community (CARICOM), which issued a statement on Thursday “strongly” condemning the invasion and calling for an “immediate and complete withdrawal” of military forces from the Eastern European country.
“The hostilities against Ukraine go counter to the principles of respect for sovereignty, territorial integrity, non-interference in the internal affairs of another sovereign state and the prohibition on the threat or use of force, and the peaceful resolution of disputes, which are the bedrock of this community,” said the CARICOM secretariat in the statement.
Some regional governments, including the administrations of Mia Mottley in Barbados and Roosevelt Skerrit in Dominica, have also condemned the military action and have called for an end to the hostilities.
SERIOUS REPERCUSSIONS
But none addressed the potential impact of this war on ordinary Caribbean citizens as directly as Jamaica’s Andrew Holness and Phillip J. Pierre of St Lucia.
“Prime Minister Holness said while it is still the early phase of the crisis, it is expected that the impact on Jamaica could be through global energy prices, with oil prices, and possibly other commodities,” stated a release from the Office of the Prime Minister.
“We know the impact on our countries, we’ve seen the price of oil increase [and] that will have serious repercussions for the economy of our country; in fact, for the entire CARICOM area,” stressed Pierre. “So it is to our benefit that this conflict gets resolved very quickly.”
Russia is the world’s second-largest oil producer behind Saudi Arabia. It’s also the largest supplier of natural gas to Europe, which gets nearly a third of its oil and around 40 per cent of its gas from Russia.
A protracted war could drive oil prices to as high as US$140 per barrel in a worst-case scenario, according to analysts at Capital Economics, a London-based independent economic research consultancy whose clients include the world’s largest investment banks and wealth managers.
Such a scenario would make it more expensive for people like Fitz Brown, the Guyanese taxi driver, to fuel their cars, and could have a devastating impact on the tourism-dependent Caribbean economies that are now trying to claw their way up from the crippling blow struck by the COVID-19 pandemic.
“If the Ukraine crisis deepens, we in the Caribbean, with developing economies, will profoundly feel the effects if it extends for any length of time,” Robin Naraynsingh, president of Trinidad and Tobago’s Petroleum Dealers Association, told The Sunday Gleaner. “Economies dependent on tourism will feel the effect of gas shortages and increased price.”
Antigua and Barbuda, which, according to the World Travel and Tourism Council, saw travel and tourism’s contribution to gross domestic product (GDP) tumble from 40.5 per cent in 2019 to 23.3 per cent in 2020 – down 53 per cent – due to the pandemic, has been bullish about a strong rebound this year in both stayover and cruise arrivals.
However, Charles Fernandez, the tourism minister, is worried the conflict in Ukraine, described as Europe’s most serious since WWII, will stifle the anticipated recovery.
“My concern is that the rising oil prices will affect us in two ways: it will affect us because the price of fuel will go up, meaning travelling to the Caribbean – in our case, Antigua and Barbuda – will increase and it will also affect, of course, cruise, which is just beginning to rebound,” Fernandez told The Sunday Gleaner.
“The other concern is once the price of oil goes up, the price of living goes up because probably over 90 per cent of everything we consume is related in some fashion to the price of oil.”
The dramatic implication of surging oil prices for Jamaica’s economy is of concern to the opposition People’s National Party, whose spokesman on energy, Phillip Paulwell, called for both sides of the political divide to work together to tackle the potential crisis.
Paulwell told The Gleaner on Thursday that Government should have anticipated the surge in global oil prices, noting that the impact was likely to “almost overnight translate into tremendous hardships and difficulty for the already struggling economy”.
A SILVER LINING?
In addition to monitoring prices at the pump, various interests in the Caribbean have also been keeping an eye on the global markets, which soared on Friday as investor concerns eased about the severity of sanctions imposed on Russia.
Tourism executives and policymakers were worried that declining stock values, coupled with increased petrol prices, would leave potential visitors with little disposal income to travel.
However, with the sanctions leaving Russia’s energy sector virtually untouched, the stock markets in the United Kingdom and Europe reversed Thursday’s sharp declines and rose by more than three per cent on Friday – the UK’s FTSE 100 index posted its biggest gain since November 2020, rising by 3.9 per cent.
In the US, stocks also roared back, with the Dow Jones Industrial Average, Nasdaq and S&P 500 gaining between 1.6 per cent and 2.5 per cent. The Dow’s 2.5 per cent rise was also its biggest since November 2020.
Oil prices also reversed early gains on Friday, falling by more than two per cent. Brent crude dropped below US$98 a barrel.
This is the sort of encouraging news that those involved in Caribbean tourism will cling to, with some suggesting that the uncertainty in Europe could have a silver lining for the region after all.
“I think that the other side of it is that what is going on in Europe will probably make a number of persons who are prepared to travel say, ‘you know what, I’m going to stay away from Europe’,” suggested Charles Fernandez, the Antigua and Barbuda tourism minister.
“The Caribbean seems to be a very safe place and as such we will further become a choice of interests for passengers looking to travel or to holiday.”