Only smoke remains: due to the conflict in Iran, serious interruptions in cigarettes are possible in the world

Problems with the supply of cigarettes may begin in the world due to the conflict over Iran, Izvestia found out. The seven countries of the Persian Gulf account for over 20% of global exports of these products. If the conflict drags on or escalates further, there may be a shortage of cigarettes and cigars. Middle Eastern countries also sell more than a quarter of the total exports of ethers and etheric alcohols — disruptions in their supply can lead to shortages of paint, household chemicals and packaging, experts believe. Whether Russia will be able to capture part of the market is in the Izvestia article.

Is the world facing supply disruptions from the Middle East

The conflict in the Middle East can lead to disruptions in the supply of a number of products. The most significant difficulties may arise with oil, ammonia, nitrogen fertilizers, gas, esters, polymers, aluminum, and cigarettes. Such conclusions follow from an express assessment of the significance for world trade of the new confrontation around Iran, which was conducted by the Center for Macroeconomic Analysis and Short-term Forecasting (Izvestia analyzed it). It is the seven countries of the Persian Gulf — Qatar, the United Arab Emirates, Oman, Bahrain, Saudi Arabia, Iran and Kuwait — that account for a significant share of the production of these goods.

As noted in the text, the peculiarity of this crisis is related to the high intensity of attacks on industrial and logistics facilities in the Middle East. Therefore, military actions affect not only raw materials, but also other markets.

The occurrence of a shortage of goods due to supply disruptions depends on at least three factors - the duration of the conflict, its intensity, as well as the availability of stocks of these products in the countries, Andrei Gnidchenko, a leading expert at the CMACP, explained to Izvestia. Strikes on critical infrastructure and large-scale production facilities within two to three months will create conditions for a shortage of goods included in this list (a significant proportion of which are supplied from the Middle East). Among them are cigarettes and cigars.

The share of global exports of these products from the seven countries of the Persian Gulf is about 20.1%, according to the document. Tobacco products in the Middle East are mainly purchased by Georgia, Kyrgyzstan, Singapore, Thailand, as well as African countries such as Libya and Somalia. They are the ones most likely to be affected by supply disruptions due to the crisis.

However, the factors should act in a complex — short-term strikes or, on the contrary, prolonging the conflict with a decrease in intensity will not cause a shortage, but will only affect the price and the redistribution of supplies in favor of countries with a strategically more suitable location, Andrey Gnidchenko specified.

The shortage itself is likely to manifest itself in the form of rising prices, supply disruptions for certain grades and brands of products, as well as lengthening logistics, said Vladimir Chernov, analyst at Freedom Finance Global. According to him, these risks are possible, but in the future they will be able to cover the shortage by transferring production to other areas or redistributing supplies.

Which exports complicate the escalation of the conflict

Izvestia studied the types of products that are most sensitive to what is happening in the Middle East. For example, the seven Gulf countries account for about 84% of global exports of iron and steel, almost 55% of limestone, and about 40% of crude oil. In addition, aluminum, polymers and nitrogen fertilizers account for a large proportion — over 16%.

Polymers and aluminum are used in packaging, construction, and the automotive industry. The occurrence of a shortage of these materials is possible with a delay of several months — as stocks are depleted, says Mikhail Nikitin, Head of International Business and Finance Practice, partner at 5D Consulting.

According to Bloomberg, Emirates Global Aluminum (UAE), the largest aluminum producer in the Middle East with a capacity of about 1.5 million tons per year, suspended the operation of its smelter in Al—Tawel after the facility was subjected to rocket and drone fire from Iran.

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The deficit will not necessarily be global in nature, emphasized Andrey Gnidchenko from the CMACP. For example, the largest importers of aluminum are the United States, which buys metal from Canada, and China (imports from Russia and the ASEAN countries). The problems caused by the closure of the Strait of Hormuz have not affected these trade flows. However, other countries have problems.: The UAE was Japan's largest supplier of aluminum (along with Australia), and the country was also in the top 3 sellers for Germany, the expert said.

The seven Gulf States also sell over a quarter of their exports of ethers and etheric alcohols. They are mainly bought by India and the EU countries. They, in turn, are used in the manufacture of paints, perfumes and cosmetics. This means that the shortage will quickly spread further down the chain to paints, coatings, household chemicals, packaging and automotive components, explained Vladimir Chernov from Freedom Finance Global.

If the conflict drags on, the production of cars, household appliances, building materials and parts of electronics will become more expensive and more difficult. According to the CMACP, at the first stage, the markets of electronics, automobiles, communications and computing equipment will not be greatly affected by direct disruptions, but later they may suffer due to higher prices and lower availability of raw materials.

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How will the supply changes affect Russia

Russia partially participates in the export of these products. For example, it sells ammonia ($1.7 billion in exports), nitrogen fertilizers ($4.4 billion), ethylene polymers ($1.6 billion), propylene polymers ($1.1 billion), and aluminum ($7 billion).

In fertilizers, petrochemicals and aluminum, the Russian Federation is likely to get a chance to strengthen its export position, Vladimir Chernov believes. Our country is one of the world's largest exporters of fertilizers with a share of 20-25% in global trade. In addition, it has significant export capacities and stable logistics through the Baltic and the Black Sea, Izvestia reported earlier.

Russia may also expand sales of ammonia and parts of petrochemicals and polymers, Vladimir Chernov added. There will be no shortage of these goods in the Russian Federation, but it is still important for us to change prices and trade flows.

For the Russian Federation, there are risks in the rise in the cost of certain imported chemical components and materials if global chains are disrupted, the expert warned. This applies to certain types of petrochemicals, solvents, polymer raw materials, paint and varnish products, and some industrial chemicals.

In addition, the aggravation of the crisis around Iran may affect the construction sector in the Russian Federation, said financial adviser and founder of Rodin.Capital Alexey Rodin. For example, last year Moscow received over 1 million tons of cement from Tehran, which is a third of all foreign shipments of this product. Despite the fact that this is only 2% of the total cement consumption nationwide, supply disruptions may be noticeable in some regions, the expert warned.