Economic Headwinds Mount as Leaders Weigh Costs of Confronting Russia

Russian gas shipments “underpin the competitiveness of our industry,” Martin Brudermüller, the chief executive of the chemical giant BASF, said at the company’s annual general meeting last month.

While calling to decrease its dependence, Mr. Brudermüller nevertheless warned that “if the natural gas supply from Russia were to suddenly stop, it would cause irreversible economic damage” and possibly force a stop in production.

The fallout from a gas embargo has been the subject of spirited debate among German economists and policymakers, with analyses ranging from manageable to catastrophic. The flow of energy is just one of several supply concerns in the industrial sector.

Rising food prices are another matter causing anxiety among finance ministers. The Treasury Department is expected to release a report later this week laying out plans by the World Bank and other international financial institutions to combat food shortages.

The interruption of wheat exports from Ukraine and Russia, which together account for 28 percent of global exports, along with supply chain disruptions, a severe drought in India that has caused it to ban shipments of grain and Covid-related lockdowns in China, are also causing food prices to spiral and increasing global hunger, particularly in Africa and the Middle East.

The question for both American and European policymakers is how to corral leaping prices without sending their economies into recession. The Federal Reserve has begun raising interest rates to tame inflation in the United States, and its chair, Jerome H. Powell, has acknowledged that bringing prices down without seriously hurting the overall economy will be a challenge.

On Tuesday, Charlie Scharf, the chief executive of Wells Fargo, said during an event hosted by The Wall Street Journal that “it is going to be hard to avoid some kind of recession.”

Article source: https://www.nytimes.com/2022/05/18/us/politics/russia-finance-ministers-economy.html