The Ukrainian crisis, which was actually a cooperative relationship between the United States and Russia, turned into an energy war. After being subjected to a barrage of economic sanctions, Russia is now retaliating.
The Ukrainian crisis that took place with dozens of economic sanctions from Western countries on Russia developed into an "energy war". The United States stops energy imports from Russia. In return, Russia will also retaliate for its energy exports to America and Europe.
President of the United States (US) Joe Biden in Washington DC, Tuesday (8 March 2022) UTC time or Wednesday (9 March) West Indonesia time, announced the termination of all imports of oil, gas, and coal from Russia to his country. This he called as part of pressure for Russia to stop attacks on Ukraine. Similar moves are being planned by two UK-based oil giants, BP and Shell.
“We banned all imports of Russian oil, gas, and energy. This means Russian oil is no longer welcome at US ports," Biden said.
The move immediately responded to Russian President Vladimir Putin by banning the export and import of raw materials and a number of other goods. In Moscow, Putin issued a decree banning the export and import of raw materials to ensure the safety and sustainability of the industry in Russia. The policy is temporarily implemented until December 31, 2022.
Government and parliament
Russia will soon decide on commodities that are on the banned list. Moscow ensures there will be no ban on private consumption. The prohibition only applies to industrial consumption.
Before the decree was announced, Russian Deputy Prime Minister Alexander Novak announced that Russia had the right to deliver gas to Europe. However, he said the termination would be detrimental to all parties.
Previously, the Ukrainian crisis had raised oil prices above 100 US dollars per barrel. However, with the announcement from Washington and Moscow, world oil prices skyrocketed. The price of Brent crude oil had reached the price level of 130.38 US dollars per barrel.
Meanwhile, West Texas Intermediate oil price reached 125.58 US dollars per barrel.
The increase in oil prices always raises the prices of other global commodities. This is also what is currently happening. For example, nickel and tin are widely owned by Indonesia the price rose more than 4 percent. The metal price increase was also noted in palladium, very important in the semiconductor industry. As much as 40 percent of the world's supply comes from Russia.
Oil prices were discussed at an energy conference in Paris. Executive Director of the Energy Agency (IEA) Fatih Birol said the IEA could release more international sugar oil stocks creating fuel prices. The IEA represents 31 industrialized countries. Russia is not included.
The Executive Director of the Reforminer Institute, Komaidi Notonegoro, said the increase in oil prices would further depress the balance of the national oil and gas trade. This is because Indonesia is an importer of clean oil and national energy consumption for oil and gas reaches 51 percent.
In the end, the oil and gas trade balance deficit will get bigger. In fact, additional foreign exchange earnings from rising commodity prices. Komaidi is worried that he will not be able to cover the need for additional foreign exchange to finance oil and gas imports.
As an illustration, the need for foreign exchange for imports of oil and gas can reach around 49.27 billion US dollars assuming an oil price of 120 US dollars per barrel. The needs consist of imports of oil and fuel products worth 44.04 billion US dollars and LPG imports worth 5.23 billion US dollars.
"With such an illustration, foreign exchange needs for oil and gas imports could reach almost 35 percent of Indonesia's current foreign exchange reserves, which are recorded at around US$ 141 billion," he said.
In fiscal matters, Komaidi is of the opinion that every increase in the oil price of 1 US dollar per barrel will increase oil and gas revenues in the 2022 State Budget (APBN) by around Rp. 3 trillion. However, when the price of oil increases, it will also increase the need for additional subsidies and compensation for oil and gas in larger amounts.
Furthermore, he added, rising prices triggered by geopolitical conflicts and wars now confirm that even in a transition era, energy, security of oil and gas supply are major issues that cannot be ignored.
Separately, the Institute for Essential Service Reform (IESR) Transformation Program Manager, Deon Arinaldo, said that when gas supplies from Russia were hampered, European countries would start thinking about not focusing on energy commodities. Indonesia can make an energy transition. However, the challenge for Indonesia is to attract new and renewable energy investments into the country.
“There are many business/industry players who are willing to invest in renewable energy, they just need how the government can facilitate it. It is time for the energy transition to be seen as a strategy for development and economic growth," he said.
Kompas, Page-1, Thursday, March 10, 2022
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