By Mahua Venkatesh
New Delhi, Mar 10: High inflation has hit the European Union as energy prices skyrocket amid the Russia-Ukraine war. While stringent sanctions against Moscow are aimed at choking Russia's economy, the Euro area comprising countries such as Belgium, Germany, Greece, Spain, France, Italy, the Netherlands, Austria, Portugal and Finland, among others too are bracing for tough times ahead.
The issue of price rise and energy supplies will dominate the European Central Bank's Governing Council's meeting on monetary policy in Frankfurt on Thursday.
Beating market expectations, in February, the annual inflation rate in the Euro Area rose to a record high of 5.8 per cent up from 5.1 per cent in January. This was primarily driven by high energy prices. More than 40 per cent of Europe's total energy requirements are sourced from Russia.
Last year in February, the inflation rate stood at 0.9 per cent. On Wednesday, the US and UK announced a ban on Russian oil. But experts warned that such measures would have a severe impact on the European nations as well.
"Already struggling with rising living costs, Europeans now face an even deeper hit to their livelihoods as the conflict in Ukraine pushes fuel and food prices higher and threatens to undermine a fragile economic recovery," a Reuters report said.
Though, the European countries are now looking at reducing their dependence on Russia for energy requirements, measures to boost renewables, biogas and hydrogen will not yield results immediately.
"It would be foolish to deny that sanctions will affect our economy but the impact of the sanctions are being felt across the world, especially as oil prices have surged. As a retaliation mechanism if Russia too turns off gas supply to Europe, they will not like it very much," Anna Koroleva, senior journalist at Expert, a Russian business weekly, told India Narrative.
Challenges have already started to show up due to supply chains disruptions following the sanctions. While this has also led to inflationary pressures especially in Europe, concerns are rising over delay in economic recovery.
As part of the sanctions announced by the US, the UK, Germany and their allies the Russian banks have been disconnected from the SWIFT international payment system leading to choking of Moscow's financial payment mechanism thereby affecting cross border trade.
Crude oil, refined petroleum, wheat, gold and coal are among Russia's top exports items. About 40 per cent of Europe's energy needs are sourced from Russia.
In 2020, Russia exported goods worth $335.5 billion across the globe.