by Rodrigo Simões Scolaro, economist at Costdrivers
The return of the Taliban extremist group to power in Afghanistan is causing changes in the global socioeconomic scenario and is likely to generate uncertainty in the oil market. A new period of instability and rising prices may appear on the horizon, with the possibility of new conflicts in the region and the influence of Iran and China on the new regime. All of these factors are likely to put further pressure on the cost of petroleum derivatives in Brazil. But why is the Afghan crisis having such an impact on the oil market?
As Afghanistan is not a major world producer of the raw material, what counts in this interference, according to specialists, is the country's location. Being positioned between the Middle East and the Far East, the Afghan nation has a strong influence on Eastern and Asian economic policy. Another factor is neighboring Iran, which is indeed a major world producer of oil that can now interfere with prices without American pressure on its borders.
Another important piece on the geopolitical chessboard is China, which has already signaled a dialogue with the new government, which generates a new combustion point in the already hectic economic confrontation with the United States, in the struggle to take the podium as a new world power.
The American president, Joe Biden, lost political support with the unsuccessful withdrawal of troops from Afghanistan, something that, according to analysts, impacts on the approval of the American infrastructure package of US$ 3 trillion, whose purpose is to revive the country's economic activity , after the long period of the pandemic.
In addition to measuring forces with the United States in the region, China is interested in investments for the reconstruction of Afghanistan and in the rich Afghan mineral reserves, whose value is up to US$ 1 trillion and have never been properly exploited. There is a lot of copper, lithium and bauxite there, important resources for the production of electric cars, especially in the development of their batteries, in addition to natural gas, for the generation of alternative energies, oil, gold, uranium, coal and a series of other minerals. valuable.
In 2019, the Afghan Ministry of Mines and Petroleum calculated around 30 million tons of copper in the country and around 2,2 billion tons of iron ore, which results in a value of over US$ 350 billion.
The news of the Taliban's resumption of power, after 20 years, resulted in an immediate impact on the oil market in the international market. On the morning of Monday, August 16, the day after the return of the extremists, the price of oil fell by 4% in the face of international apprehension over the return of conflicts in the region with the departure of American troops.
At around noon, October contracts for Brent oil (global benchmark) were down 2,11%, at US$69,10 per barrel, on the ICE in London, while September contracts for WTI (American benchmark) were down 2,33%, selling for US$66,62 per barrel, on the New York Mercantile Exchange (Nymex). Two days later, Brent and WTI continued to record drops of more than 2%. In Brazil, Petrobras' preferred shares (PETR4) accumulated losses of 2,47% in the first two trading sessions of the week. The record drops in oil prices lasted for another seven days until, on August 23, Brent rose 5,5% and WTI, 5,6%.
The day following the return of the extremist group was also marked by a generalized drop in stock markets in much of the world, especially in Europe and also in Brazil. The Ibovespa closed August 16th with a drop of 1,66%, remaining below 120 thousand points after three months.
The Afghan currency, called the Afghan, suffered a sharp depreciation, losing about 80 dollars of value in the week before the resumption. A decline that puts pressure on inflation and leaves the already fragile Afghan economy dependent on international aid. Even so, the expected non-recognition of the Taliban government as official by most of the international community should make it difficult for the local Central Bank to seek dollars and contributions from the IMF.
How might the Afghan crisis affect Brazil?
With a weakened economy, Afghanistan has no influence on other world economies, which means that the crisis in the eastern country is not a decisive factor in the economic scenario of the entire planet. However, the presence of Iran and China as new geopolitical influencers and the return of socioeconomic instability in the region, with the possibility of new conflicts, are factors that tend to have a negative impact on the global economy. If oil prices rise, Brazil may have even more difficulty in containing the rise in gasoline and cooking gas prices, giving new impetus to high inflation, and bringing new difficulties to the resumption of the country's economic growth.