S&P: Central Europe is more resilient to supply shocks in the face of Iran war

S&P Global reported?on Tuesday that Central and Eastern Europe is more resilient to energy?shocks as a result of efforts to diversify the sources of energy since Russia's invasion in?Ukraine 2022. This provides buffers against economic impacts of the war in the Middle East. S&P Global said?on Tuesday that the region's import-dependent financial markets have been shaken by U.S. and Israeli war against Iran. This has driven up energy prices, central European currency, and bond yields, before Tuesday's relief rallies on hope of de-escalation.

"Central and Eastern Europe was hit hard by the beginning of the Ukraine war, and they became heavily dependent on gas and energy imports from Russia," Ravi Bhati said in an online forum.

"And very soon... they had to scramble, and find alternative sources." In that sense, the country has become more resilient to supply-side shocks, he added, citing access to global liquefied gas supplies and a drive to develop renewable energy.

POLAND LEADS IN DIVERSIFICATION

Poland, the largest economy in the region, built its first LNG facility in 2015. It has also recently built pipelines with neighbouring countries to wean themselves off Russian supplies.

Poland's location on the Baltic Sea allows it to be independent from Russian oil, and it even supplies two German refineries through its oil import terminal in Gdansk.

Warsaw has built a nuclear power plant on the coast and 6 gigawatts offshore wind in the Baltic.

The Czech Republic, on the other hand, has switched to LNG and gas from Norway, which it receives mainly via a Dutch terminal. It also stopped relying on Russian oil in 2025 when it upgraded the TAL pipeline to the west, allowing enough capacity for it to meet its needs.

Hungary still imports 75% of the gas it uses and almost all of its oil from Russia. Its currency and bonds markets were among the worst-hit in Central Europe over the past few days because of its high import requirements and strong reliance upon cheap energy. (Reporting and editing by Andrei Khalip, Gergely Strzelecki, Jason Hovet and Marek Szakacs)

(source: Reuters)