Tapia assures that the Basque Country and the EU are in an energy emergency situation

The Minister for Economic Development, Sustainability and the Environment, Arantxa Tapia, has assured that both the Basque Country and the European Union are in an energy emergency situation caused by the war, which requires “extraordinary and forceful” by the EU because, if the current price escalation continues, electro-intensive companies will be “doomed to stop”.

In the press conference after the Governing Council, Tapia detailed the economic impact on the Basque Country of the conflict in Ukraine, after the invasion of Russia, and warned that the war in Ukraine is a “clear barrier” to the economic recovery of the Autonomous community.

Tapia has indicated that, in the face of an energy emergency situation such as the current one, the Basque Government considers it appropriate “extraordinary measures“that allow activating new European resources, from the State and Euskadi’s own resources “aimed at alleviating this condition”.

According to the data provided by the minister, exports from the Basque Country to the war zone (Russia and Ukraine) amounted to 292 million euros in 2021 and imports were 1,540 million. Therefore, as she has pointed out, the Basque Country is “clearly an importer of goods from the war zone” and trade with both countries has almost disappeared, at a very high risk “.

The Minister pointed out that, if another twelve possible countries affected by an extension of the conflict are included, the affected Basque exports would amount to 2,300 million and imports to 3,000 million.

This represents a “clear barrier” to economic recovery in terms of Basque GDP, which is why it has already been announced that the forecasts will be “obviously lowered”.

Tapia added that production costs for Basque companies are “shooting up”, with a “higher” electricity bill and more transport costs for gasoline or raw materials.

The Minister pointed out that, with the price of oil and natural gas “high as it has not been known for so long” and, taking into account the energy dependency of the Basque Country, there will be a rise in the price of products, so that it will increase inflation. Together with this, an increase in financial risks is expected.

CAV companies

Currently, there are 36 Basque companies established in Russia, of which 13 are productive and 23 commercial. On the contrary, in Ukraine there are only three commercial offices, so the risk “is limited”.

Tapia added that in the twelve potentially most affected countries (Hungary, Poland, Finland, Sweden, Moldova, Estonia, Latvia, Lithuania, the Czech Republic, Slovakia, Romania and Belarus), also including Russia and Ukraine, there are 119 companies of the CAV with 235 installations, of which 117 commercial and 118 productive.

The Basque Executive confirms a series of common concerns in the industry of the Basque Country and it is estimated that the main problems in the short and medium term will come from a new increase in the prices of raw materials and energy. On the other hand, the tensions with the distributors are more complicated and, at a financial level, the uncertainty of the markets also predicts that access to financing will be “more expensive”.

In addition, it represents a “blow to general morale and confidence” and entails economic uncertainty and a delay in economic recovery when the health crisis has not yet been overcome. All this can lead to the consequent slowdown in consumption and possible paralysis of investments.

The Basque Government has indicated that there are also specific concerns, according to sectors, such as those derived from the shortage in the supply of strategic materials such as aluminium, palladium, steel, titanium, zircon, as well as vegetable oil (sunflower) and the price of cereals such as wheat, corn or barley that are incorporated directly into the transformation processes and also serve as animal feed. Along with this, imbalances in the supply chain or logistics problems.