North-West Europe’s dependence on Russian natural gas could come to haunt the region’s energy security given the current geopolitical scenario. The prevailing geopolitical fault lines could widen if the West decides to intervene further in the war. The intervention is quite a possibility after yesterday’s United Nations General Assembly resolution where the US Secretary of state categorically denounced Russian aggression in Ukraine as a ‘threat to rules-based international order.

40% of EU’s natural gas supplies come from Russia. With Germany deciding to freeze the Nord Stream 2 pipeline project and Russia reducing the flow rates of both the Yamal pipeline and the Nord Stream 1 pipelines, North-West Europe is having to rely on large scale imports of LNG from the US and Qatar. Dutch TTF rose nearly 50% to reach a new quarterly high. Germany which has had no LNG terminals up until now is planning to build two of them.

The NBP futures for the month of April settled at USD 52 on the 2nd of March signifying inflationary tendencies for the European market in the near term. With ICE Brent touching the USD 110 mark yesterday, Europe may have to consider falling back on coal reserves for its short-term energy security if the war continues unabated. The cost shock from rising energy prices could provide further buoyancy to the already inflated chemicals market while rising prices of crude oil could very well pass on the cost-push down the petrochemical value chain.