Read news from:
Austria
SHARE
COPY LINK
For members

UKRAINE

How Spain could be impacted by Russia’s invasion of Ukraine

Russia’s invasion of Ukraine on Thursday could have a considerable impact on Spain's economy, with the price and supply of energy and certain food products already affected.  

Published: 24 February 2022 10:45 CET
How Spain could be impacted by Russia's invasion of Ukraine
People stand by the body of a relative stretched out on the ground after bombings on the eastern Ukraine town of Chuguiv on February 24, 2022. Russia's invasion of Ukraine could have far reaching consequences for Spain's economy and Europe's. (Photo by Aris Messinis / AFP)

At four in the morning (GMT+1) on Thursday February 24th, explosions started to be heard in several Ukrainian cities, in what Vladimir Putin has described as a “large-scale operation” to defend the Ukrainian independence fighters in the Donbas region.

Ukrainian authorities have already reported the first casualties and announced that Russia has launched a “full-scale invasion” of the country, in the words of the Ukrainian foreign ministry with the aim of “destroying the Ukrainian state”.

“The Government of Spain condemns Russia’s aggression against Ukraine and expresses its solidarity with the Ukrainian Government and people,” Spanish Prime Minister Pedro Sánchez tweeted on Thursday, adding that he was in “close” contact with Spain’s EU and NATO partners to coordinate a response to the attacks.

It’s a harrowing situation for the 44 million inhabitants of the eastern European nation and an unnerving scenario for the world as a whole as it tries to put a still ongoing global pandemic behind it.

According to a survey by Spanish social research group Instituto DYM, 56.3 percent of Spaniards are “fairly” or “very” worried about the potential of the conflict having an impact on life in Spain. 

The escalating war may seem far away for many here in western Europe, but how big an impact could the Ukraine-Russia conflict actually have on Spain?

Energy

In terms of the effect it could have on energy supplies, one of the biggest worries for European nations, Spain has an advantage in that it doesn’t depend on natural gas that comes from Russia, unlike the case for Germany, Hungary or the Baltic countries.

The gas that is imported from the region arrives by sea in large methane tankers that transport it in a liquid state.

According to Spain’s Strategic Reserves Corporation (Cores), in 2021 Spain imported 10.5 percent of its natural gas from Russia compared to 44 percent from nearby Algeria. 

That being said, the ongoing conflict between the north African nation and its neighbour Morocco did result in Algeria temporarily cutting supplies to Spain last year and could prove equally if not more troublesome for the Spanish economy in 2022.

But even if Spain may not be as affected by Russia’s invasion of Ukraine as other European nations, it couldn’t avoid the consequences of a general rise in energy and fuel prices throughout the continent.

This comes at a time when the price of electricity in Spain has risen by 46 percent on average in the last year, diesel is 25 percent more expensive and petrol costs 23 percent more.

Oil prices already surged on Thursday, with Brent breaching $100 a barrel for the first time since 2014 and very real fears that as the conflict in Ukraine unfolds consumers in Spain and elsewhere could be faced with scenarios similar to the oil crises of the 1970s.

Food 

Practically half of all maize imports to Spain are from Ukraine, and a large proportion of other grain consumed in Spain comes from the eastern European nation. This also includes 60 percent of the sunflower oil that Spain buys from overseas and 31 percent of vegetable oil.

Spanish agricultural website Agroinformación already reported an increase in price of wheat, barley, oatmeal and rye as the conflict escalated. 

Russia’s confirmed invasion of Ukraine is certain to drive prices up further and create more volatility. As a precedent, when Russia invaded Crimea in 2014, cereal prices rose by 20 percent. 

A reduction in debt purchases and a rise in interest rates by the European Central Bank would mean economies with more public debt over GDP, which includes Spain, would feel the pinch especially. 

READ ALSO: The food products that are more expensive than ever in Spain

Troops

There are currently 800 Spanish NATO soldiers deployed at the border between Russia and Ukraine. 

A survey by Spain’s Elcano Royal Institute for International and Strategic Studies found that 48 percent of Spaniards were actually in favour of Spain participating in NATO operations in the conflict, particularly men over the age of 45 with right-wing political views. 

Even though Madrid will be hosting a NATO summit in late June, Spain is still considered a medium military power on the international sphere and Defence Minister Margarita Robles has so far not suggested that more troops will be sent to assist Ukrainian forces.

However, Pedro Sánchez will attend an extraordinary European Council meeting in Brussels on Thursday and any decision on a coordinated intervention in the conflict will likely be accepted by the Spanish Prime Minister, given his eagerness for Spain to play a more pivotal role in both the EU and NATO.

EU nationals have so far not agreed on how to deal with the Ukraine crisis, with some sending military support to the country (Spain among them) and others pushing for a diplomatic solution.

READ ALSO: How much influence does Russia have over Spain?

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

WORKING IN SPAIN

Why the Basque Country is Spain’s industrial powerhouse

Mining roots stretching back centuries, an astute transition to R+D, locally-run companies, and a special fiscal agreement with the government. When it comes to industry and jobs, the Basque Country is just different to the rest of Spain.

Published: 9 April 2024 10:20 CEST
Why the Basque Country is Spain's industrial powerhouse

The Basque Country is something of an exception in Spain. It’s one of the country’s smaller regions, with a little over 2 million people living there, yet also has one of the lowest unemployment rates in the country and the second highest per capita income after Madrid.

Much of this economic strength comes from a centuries-long industrial history in the Basque Country, as well as a bespoke fiscal agreement with the national government that gives the region greater control over taxes. In recent decades, it’s overtaken Catalonia to emerge as arguably Spain’s real industrial powerhouse.

Though it’s not what it was, industry is still the main economic motor in the Basque economy, making up almost a quarter (23.1 percent) of GDP according to INE data from 2022, meaning it’s the region with the second largest share behind only neighbours Navarre.

It also has a high percentage of people working in industry, 18.5 percent, which is well above the national average (11 percent) and it is also far and away Spain’s strike capital, accounting for around half of all industrial action in Spain. 

READ ALSO: Why the Basque Country is the strike capital of Spain

Though historically Barcelona was Spain’s industrial base for many years, a combination of factors have propelled the Basque Country to its status as Spain’s industrial powerhouse in recent decades.

As is often the case with this northern region, the Basques do things slightly differently to the rest of Spain. It has used its pre-existing industrial heritage to take advantage of new technologies, keep industrial hubs at home, introduced effective traineeships and career paths to keep the industrial motor going with local staff, all while benefiting from the regimen foral (chartered regime) that gives the region a level of fiscal autonomy (some would say unfair advantage) from the central government.

Industrial roots

But this is nothing new. The idea of the Basque Country as an industrial powerhouse goes back centuries to the mining industry. From as early as the 14th century, Basque iron-ore mining contributed to economic growth that outpaced many other parts of Spain, and then, in the 18th century, Basque industry shifted its attention to the steel industry.

Around a century or so later, in the 19th century, blast furnaces allowed Basque’s to export iron in bulk quantity, mostly to the UK. As a result of this thriving export business, the Basque Country underwent a period of industrialisation which not only boosted steel production due to increased iron ore production, but it also put Basques firmly in the tool and machinery industry and set the region up for a strong industrial future.

The Basque Country’s mining roots stretch to the 14th century. (Photo by CESAR MANSO / AFP)

Technological transition

One of the main reasons the Basque Country has emerged as an industrial power is its adaptability. Fernando Barciela, a long-time contributor to El País’ business section, has written on this transition, and how the industrial past set the Basque Country up for success in the future: “In the Basque country, the old blast furnaces, steel industries and tool manufacturing companies of that period have been transformed into a high-tech industrial infrastructure, which includes the automotive and aeronautics sectors, as well as new energies, [and] machine tools.”

As Barcelona’s industrial power wanted at the end of the 20th century, the Basques positioned themselves at the cutting edge of global industry and have established a highly successful export industry, something that contributes to the region’s wealth overall.

READ ALSO: Why are the Basque Country and Catalonia so rich compared to the rest of Spain?

Barciela notes that “they [Basque companies] export between 70-90 percent of their production, achieving surpluses for the region’s trade balance, of some €5 billion in one of the last few years.” Long-term investment in technology and R&D from the regional government has helped solidify the Basque Country as one of the most innovative parts of Europe.

As such, the Basque Country boasts the headquarters of major international industrial names like Iberdrola, Tubos Reunidos, Aernnova Aerospace, Arcelor, Cie Automotive, Irizar, Mondragón, and ITP Aeronautica, among many others. And unlike any other regions that have multinational companies based there, or indeed other countries, the majority of the companies based in the Basque Country are owned and run by long-established Basque families, many of whom work together.

There are also apprenticeship schemes to help local youngsters join industries easily and a more balanced population distribution across the Basque Country as R+D plants and factories are found in smaller towns and villages, not just close to the big cities of Bilbao and San Sebastián.

Barciela also suggests that the Basque Country’s industrial base (and economy more broadly) was insulated from the worst effects of the financial crisis and “it was also a great help that the Basque savings banks were saved from the property bubble. This meant that most of them avoided going bust.”

While around the rest of the country most banks focused on property and mortgages, “the Basque savings banks continued to support industrial projects developed by the companies and backed by the government in Vitoria.”

Bilbao’s port is the most important in northern Spain. Photo: ANDER GILLENEA/AFP

The future

However, the future isn’t entirely rosy for Basque industry or its economy. According to Spanish public broadcaster RTVE, the region’s economic activity rate is falling and is currently lower than the national rate (57 percent compared to 59 percent nationally).

Similarly, the decreasing weight of its regional GDP in terms of the national economy, and the combination of an ageing population and a worsening public health system, all indicate that changes could be needed in the future. These sorts of structural changes will be costly and could impact on the Basque Country’s position as one of the wealthier regions of Spain. Though with its regimen foral it is unclear how big of an impact this will have.

Even the traditional high wages in the Basque Country are falling closer to national levels. Jon Bernat Zubiri Rey, professor of Economics at the Universidad del País Vasco, told RTVE that in “the Basque Country there was a large wage differential in relation to Spain, but this has tended to decrease” in recent years.

Similarly, the Basque economy itself is beginning to change. Though its industrial base is so well established that it will always likely form the backbone of the Basque economy, the tourist sector, traditionally not as integral there compared to other parts of Spain, has grown since the disbandment of ETA and pivoted to the tourist sector, perhaps most notably with then opening of the Guggenheim museum Bilbao in 1997.

Basque hotels registered 3.6 million check-ins in 2023, 10.4 percent more than in the previous year.

The Basque Country is also having a slower post-pandemic economic recovery than most regions. In 2023 the regional economy grew by 1. percent, well below the national average of 2.5 percent.

SHOW COMMENTS