Business lessons from Russia

25 March 2022

Two minute read

As the world watches in horror at the escalating conflict between Russia and Ukraine, it would be remiss to not reflect on the business lessons learnt, despite the tragedy of war.

One immediate lesson must be taken from this unfortunate and devastating crisis.

An over-dependence on a single source of supply is dangerous for any purchaser.

The International Energy Agency (IEA) reported that in 2021 around 40% of the total gas consumption in the EU was imported from Russia. Although the import figures across the member states will vary, it is no mean feat for a single country to supply almost half of the total gas demand of multiple nations.  Admittedly, one can see the allure for countries like Germany, Italy -the biggest purchasers of Russian gas- and other EU countries: Russian gas is stable and within close proximity, so why look elsewhere? Nations dependent on Russian gas are now doing precisely that -looking elsewhere- albeit in a panic, and with last resort plans.

The Russian-Ukraine crisis was a ticking bomb long before it went off. A review of the histories of the two nations, Ukraine’s NATO ambitions, and Russia’s position on NATO will reveal that events were bound to escalate: it was simply a matter of time.

 

On 03 March 2022, the IEA released a ten point plan on how the EU could reduce its imports of Russian natural gas by more than one-third within a year. This plan is a reaction to the crisis, and may not assist countries severely dependent on Russian gas. Purchasers of goods and services must always leave themselves with alternatives long before disaster strikes. In so doing, your response to a crisis is not a ‘knee jerk reaction’, but a carefully laid out agenda in anticipation of one supplier/producer pulling the plug or discontinuing services. The lack of pre-planned alternatives is the reason why the IEA could only recommend reducing reliance and not a total cut-off from Russian gas. Whilst the EU may be outraged by Russia’s invasion of Ukraine, it cannot afford to be so outraged as to cut off a country that meets almost half of its gas demands.

We continue to watch closely as the crisis unfolds. The primary victims here are the people; any loss of life is a tragedy. Governments, businesses, and individuals must however learn a crucial lesson from this unfortunate event, which is this, ‘Always have a contingency plan long before you need it’. Preparation for plan B is as critical as preparation for plan A.

We will explore lesson two in our next update.

Leave a Comment

Your email address will not be published.