Putin Death Toll Increases

Putin’s best opportunity to drive a wedge between Europeans will arrive this winter.

Before the war Russia supplied 40-50% of the EU’s natural-gas imports. In August he turned off the taps on a big pipeline to Europe and fuel prices surged, squeezing the economies of Ukraine’s allies.

So far, Europe has weathered this shock well, stockpiling enough gas to fill storage sites. But the rise in wholesale energy costs has still reached many consumers. Even though market fuel prices have declined from their peaks, real average residential European gas and electricity costs are 144% and 78% above the average for the last 20 years.

The higher the costs, the less people can afford to heat their homes and this is about to become the biggest issue for European governments – albeit a temporary one.

The colder the temperatures people experience, the more likely they are to die. And if the historical relationships between mortality, weather and energy costs continue to apply, the death toll from Mr Putin’s “energy weapon” could exceed the number of soldiers who have died so far in combat.

Although heatwaves get more press, cold temperatures are on average deadlier than hot ones. Between December and February, 21% more Europeans die per week than from June to August.

In the past, changes in energy prices have had a small effect on deaths. But this year’s cost increases are remarkably large.

The relationship between energy prices and winter deaths could change this year. But if past patterns persist, current electricity prices would drive deaths above the historical average even in the mildest winter.

Exact mortality totals still depend on other factors, particularly temperature. In a mild winter, the increase in deaths might be limited to 32,000 above the historical average (accounting for changes in population). A harsh winter could cost a total of 335,000 extra lives.

Unsurprisingly, the gap in seasonal death rates is greater in warm countries than in cold ones. In Portugal 36% more people die per week in winter than in summer, whereas in Finland just 13% more do as cooler countries have better heating and insulation.

However, when you compare temperatures within countries rather than between them, the data confirm that cold kills. On average, in a winter 1°C colder than normal for a given country, 1.2% more people die.

Most European governments have kept an energy price cap which will save thousands of lives. The main reason Jeremy Hunt has only confirmed it until April, is that once winter is over, it becomes a matter of comfort rather than life or death. The most important thing short term, is to make sure people can heat their homes not watch television.

Prices will also likely start to decline after April which should mean that the price cap becomes less relevant (fingers crossed).

High fuel prices can exacerbate the effect of low temperatures on deaths, by deterring people from using heat and raising their exposure to cold. Given average weather, the best guess is that a 10% rise in electricity prices is associated with around a 0.6% increase in deaths, though this number is greater in cold weeks and smaller in mild ones. An academic study of American data in 2019 produced a similar estimate.

In recent decades consumer energy prices have had only a modest impact on winter mortality, because they have oscillated within a fairly narrow band. In a typical European country, holding other factors constant, increasing the electricity price from its lowest level in 2000-19 to its highest raises the estimate of weekly death rates by just 3%. In contrast, reducing the temperature from the highest level in that period to the lowest increases them by 12%.

Now, however, prices have broken out of their prior range. The rise in inflation-adjusted electricity costs since 2020 is 60% greater than the gap between the highest and lowest prices in 2000-19. As a result, the relationship between energy costs and deaths could behave differently this year than it has in the past. In cases like Italy’s, where electricity costs are up nearly 200% since 2020, extrapolating a linear relationship yields extremely high death estimates.

It is obviously hard to predict true mortality rates in Europe this winter with confidence but if the patterns from 2000-19 do continue to apply in 2022-23, Russia’s energy weapon will prove highly potent. With electricity prices near their current levels, around 147,000 more people (4.8% more than average) would die in a typical winter than if those costs returned to the average from 2015-19.

Given mild temperatures—using the warmest winter during the past 20 years for each country—this figure would fall to 79,000, a 2.7% increase. And with frigid ones, using each country’s coldest winter since 2000, it would climb to 185,000, a rise of 6.0%.

The size of this effect varies by country. Italy has the most predicted deaths, owing to its soaring electricity costs and big, ageing population. Estonia and Finland also do poorly on a per-person basis. At the opposite extreme, France and Britain, which have imposed price ceilings, fare reasonably well due to our price cap.

For Europe as a whole, the impact of energy-price increases could surpass the number of soldiers thought to have died in Ukraine. Russia’s invasion has direct consequences, but also indirect consequences which are about to become more apparent.

The damage Mr Putin is inflicting on Ukraine is immense. The cost for its allies is less visible but as winter sets in, our commitment will be measured not only in aid, but also in lives.


Regarding the markets- Putin has obviously had a massive impact on their underperformance this year. An event/war everyone could have done without shows no signs of abating yet.

If this situation rumbles on, what should one expect in global equities next year?

It's interesting how we've noticed many of our traders and trading teams start to adopt some short sell positions on their portfolios. The most common markets being sold right now are the DAX and CAC in Germany and France, alongside many of the US markets.

Global stock markets have rallied from their lows, but is there another retracement ahead?

In the short term- our traders are well positioned if the markets do pull back.

We would expect in the mid term most will continue to align with the BUY side, but if over the next few weeks, they can catch some downward traction, before moving back onto the BUY side, we could see a very good end to Q4.

Stay tuned.
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