If there is one lesson that ought to have been learnt by now, it is that the extent to which the EU has allowed itself to become dependent on Russian natural gas has been remarkably reckless.
But that’s not the only dangerous dependency that has been created, as the Daily Telegraph’s Ambrose Evans-Pritchard explains here:
Putin has the means to cut off critical minerals and gases needed to sustain the West’s supply chain for semiconductor chips, upping the ante in the middle of a worldwide chip crunch.
Furthermore, he could hobble the aerospace and armaments industry in the US and Europe by restricting supply of titanium, palladium, and other metals.
If he controlled Ukraine, his control over key strategic minerals would be even more dominant, giving him leverage akin to Opec’s energy stranglehold in 1973.
The Kremlin could unleash an inflation shock every bit as violent as the first oil crisis, with a recession to match.
The White House has been slow to wake up to Russia’s counter-strike capability. It did not canvas US semiconductor companies on the risk until the critical materials firm Technet revealed the extent of US dependency on Russian supply of C4F6 gas, neon, palladium, scandium.
Some 90pc of the world supply of neon, used as laser gas for chip lithography, comes from Russia and Ukraine. Two-thirds of this is purified for the global market by one company in Odessa. There are other long-term sources of neon in Africa but that is irrelevant in the short run.
Technet said Russian C4F6 gas is used for etching node logic devices. Palladium is used for sensors, plating material and computer memory (MRAM).
The world’s biggest producer of titanium is VSMPO-AVISMA, located in the ‘Titanium Valley’ of Western Siberia.
It is owned by Rostec, the state conglomerate controlled by Sergey Chemezov, an ex-KGB operative who served with Putin in East Germany. Russia and Ukraine together account for 30pc of the global supply of titanium, but this understates their hegemony over the production chain.
VSMPO-AVISMA supplies 35pc of Boeing’s titanium, mostly for 737, 767, 777, and 787 jets. It is used in engines, fans, disks and frames, prized for its resistance to heat and corrosion, and for its ratio of weight to strength.
The US Bureau of Industry and Security published a report last October warning that VSMPO-AVISMA was providing titanium sponge to customers in the US at “artificially low” prices, with Russian state support, enabling it to capture a “significant share of Boeing’s business”.
This should have raised a red flag. Weeks later Boeing committed to even deeper ties with the company.
In effect, Russia has been doing what China did earlier with rare earth metals: establishing a lockhold by selling below cost and knocking out the Western supply chain. The report said Russia is increasingly able to use this dominance “as a tool of geopolitical leverage”.
The Bureau warned that the US is down to one ageing plant capable of producing titanium sponge at scale, and no longer has any titanium reserve in the National Defense Stockpile.
It relies on supply from a hostile state-controlled entity to build US fighter jets, rockets, missiles, submarines, helicopters, satellites, and advanced weaponry. The report called for urgent measures to rebuild domestic production and acquire strategic reserves. What a shambles…
Under the circumstances, the word “shambles” is something of an understatement.
There’s also the small matter of aluminum.
Deepening trade ties is often seen as a way of reducing the chance of a conflict between two countries. Maybe, but I suspect that to think so risks muddling correlation with causation. Either way, deepening of trade relations between the West and Russia (at least in certain areas) may well have increased the risk of a dangerous and destabilizing conflict between Russia and a third country (Ukraine). After all, Putin has good reason to believe that the dependency created by these deeper trade ties means that any sanctions imposed in response to his moves against Ukraine will only go so far, and that the resulting relatively limited price is worth paying. We have yet to see how bad the consequences of that belief will turn out to be.
Beyond that, there is the wider question of how wise it is for the U.S. (or, more generally, the West) to become dependent in any important strategic sense on a country that is either unfriendly or showing clear signs of moving in that direction.
That’s a question that ought to answer itself. But that does not appear to have been the case when it comes to trade with Russia.
And not just Russia.
Note Evans-Pritchard’s reference to China and rare earths.