Crimea’s dented investor confidence, but the price of gas suggests there’s no need to worry
This morning, Germany's ZEW survey demonstrated how investor sentiment can take a knock over international environment worries.
The country’s ZEW survey falling for a second month in a row to 46.6 in March, from February’s 55.7. But ZEW officials have said that ongoing problems in Crimea have played a part in the drop, which could well prove to be a blip. The economic upswing is not at risk from the current situation, assured Dr. Clemens Fuest, ZEW president.
In fact, Attitude towards current conditions remains upbeat, rising slightly to 51.3 – the highest it’s been since August 2011 – and pointing to a further acceleration in annual GDP growth from the 1.4 per cent seen in the fourth quarter, says Capital Economics.
But annual export growth is at best subdued, at one per cent – not an overly comforting figure, given current concerns on imports – namely, gas supplied to Europe from Russia.
Soaring prices would prove a big problem for Europe. If Russia cut off flows through Ukraine, Europe would face higher prices and disrupted supplies. Last year, the country provided 30 per cent of the gas consumed in Europe.
Yesterday, Paolo Scaroni, chief executive of Eni, the Italian oil and gas group, spoke to the FT, stressing Italy, Austria and the south of Germany would be especially at risk, given that they're principal markets for Russian gas that's piped through Ukraine.
And in a note this morning, Citi analysts cautioned that the crisis in Ukraine has reemphasised Europe’s structural reliance on Russian gas supplies, and that talk on sanctions on gas exports from Russia “ignores market realities”.
But on the flip side, markets have held their nerve over the past two days, despite uncertainty around Crimea and its bid to join Russia. And more than that, gas prices are lower today: if the situation turns out to be a done deal – Putin's just called Crimea an "integral part" of Russia – there may be little reason for them to jump again.