COVID-19: EU export ban will delay the UK’s vaccine rollout

• EU threatens to ban covid vaccine exports to the UK unless AstraZeneca fulfils its contractual agreements
• UK Prime Minister Boris Johnson expected to dissuade EU leaders from imposing a vaccine export ban
• Britain’s COVID-19 vaccine rollout at risk of significant delays
• Pound Sterling (GBP) largely unchanged against the euro (EUR) and US dollar (USD)

The UK’s COVID-19 vaccination programme, which has been touted as one of the most successful globally, is at risk of a significant deterioration due to threats from the European Union to block vaccine exports.

Last week, European Commission President Ursula von der Leyen said that the EU is considering blocking coronavirus vaccine exports to countries with higher vaccination rates that are not engaging in reciprocity with the bloc.

If the EU decides to impose a vaccine export ban, this could also derail UK Prime Minister Boris Johnson’s lockdown exit roadmap, and in turn, drag pound Sterling (GBP) lower in currency markets.

According to a senior EU official, European leaders will more than likely block AstraZeneca vaccine exports to the UK, at least until the pharmaceutical giant fulfils its contractual obligations and delivers the agreed amount of doses to the bloc.

UK Prime Minister Boris Johnson is expected to contact EU leaders ahead of a scheduled meeting on Thursday and urge member states to reconsider their move against Britain.

Data analytics company, Airfinity, noted that the comparatively small number of doses that would be withheld from the UK and rolled out in the EU would not significantly boost any of the 27-member states COVID-19 vaccine campaigns.

Wolfgang Munchau, the EuroIntelligence group’s founder, called the EU out for its “vengeful spite”. Mr Munchau said to divert attention away from their botching of vaccine procurement, “EU leaders had resorted to what they do best – “the blame game.”

Is the EU’s reputation at stake over the vaccine export ban?

Vaccine nationalism, in which governments and political blocs vie for supremacy of supplies, appears to be emerging across  Europe.

The World Health Organisation (WHO) also expressed concern over the implication of vaccine nationalism on the global infection rate in the wake of threats from the EU over banning exports due to its disastrous vaccination programme.

Britain’s vaccination programme is now at risk of a two-month delay due to the EU’s proposal to block vaccine exports to the country, which, if implemented, could risk a sharp deterioration in relations with the UK.

UK Defence Secretary, Ben Wallace, said the EU’s global reputation is on the line ahead of Thursday’s outcome, warning that “the world is watching” and that an act of nationalism would strain its relations with other countries.

Mr Wallace told Sky News that the fight against the pandemic should be collaborative. He added: “If contracts get broken, and undertakings, that is a very damaging thing to happen for a trading bloc that prides itself on the rule of law.”

British journalist Dominic Lawson said that the EU’s threat to penalise Britain for a more progressive vaccine rollout is a win for post-Brexit Britain.

Mr Lawson said that you might have thought that “the Commission President was Nigel Farage wearing an Ursula von der Leyen latex face mask.” He added: “Not even Mr Farage himself could have dreamt of a more ingenious way to make the British people grateful that they had exited the bloc.”

EU leaders are expected to discuss the proposal via video conference on Thursday after face-to-face meetings scheduled for Sunday were cancelled amid signs of a third COVID wave on the continent.

Although President Von der Leyen said the EU is considering “all options”, France and Germany are believed to be in support of invoking Article 122 of the EU’s treaty, which would allow Brussels to activate emergency action over vaccine distribution.

It comes as official data from Reuters shows that more than 15 countries in the EU have reported a significant increase in the infection rate, with France reimposing a national lockdown.

The recent suspension of the AstraZeneca jab amid blood clot concerns has also hindered the bloc’s vaccine rollout. According to the European Centre for Disease Prevention and Control (ECDC), the EU has only vaccinated 10% of adults, compared to the UK, which has vaccinated more than 50% of its adult population.

Until news that a batch of COVID-19 vaccines manufactured by an AstraZeneca plant in India was delayed, the UK was on course to beat its target to offer every adult a coronavirus jab by July.

The recent delivery issue with the India plant is expected to set the vaccination pace back by two weeks.

However, with approximately 30 million of the EU-manufactured Pfizer-BioNTech doses yet to arrive in the UK and the bloc threatening to ban exports, the science and analytics company, Airfinity, warns Britain’s vaccination programme could be delayed until early August.

Does the UK have vaccine contracts with other manufacturers?

Besides securing deals with Oxford-AstraZeneca and Pfizer-BioNTech, Britain has also signed contractual agreements with Novavax, Moderna and Johnson & Johnson, which has developed a single shot coronavirus vaccine.

The Moderna vaccine is expected to be rolled out later this spring; however, the Novavax and Johnson & Johnson jabs may not be deployed until the summer.

Airfinity also said there could be further delays to Britain’s vaccine rollout if the EU imposes a vaccine ban on all exports, including Moderna, Novavax and Janssen’s jab. According to the company’s analysis, in this scenario, the UK would not hit its inoculation target until August 27th.

Airfinity Chief Executive, Rasmus Bech Hansen, warned: “Blocking vaccine exports would be a lose-lose situation.”

He added: “While a COVID-19 vaccine export ban would offer the EU more doses short-term, the marginal increase means it won’t fundamentally change its vaccine availability, and the bloc will more than likely become dependent on vaccine imports.”

Mr Hansen noted that an export ban poses a significant risk to the global rollout “as any potential UK retaliation on sub-ingredients would harm not only the EU and UK but the world, by stalling overall production.”

An escalation into a full-blown “vaccine war” between Britain and the EU would also spell disaster for pound Sterling (GBP), which appears to be struggling against some of its major trading currency rivals on Monday.

Pound Sterling unchanged against the US dollar and euro

Rising yields have been a thorn in the British pound’s (GBP) side recently, especially against the safe-haven US dollar (USD), which has been a top performer in the last few weeks.

A resurgent greenback has kept the British pound to US dollar (GBP/USD) exchange rate trading below the USD 1.40 level for most of March.

At the time of writing, GBP/USD is trading comfortably around USD 1.386. While pound Sterling (GBP) is forecast to advance in 2021, with the global policy picture predicting a move above USD 1.40, near term headwinds, remain a possibility due to vaccine drama and continuing Brexit trade tensions.

While the deteriorating coronavirus situation in Europe, which has seen several member states reintroduce lockdowns, weighs on the single currency, vaccine export threats have pushed the British pound to euro (GBP/EUR) exchange rate lower.

Brexit skirmishes have also contributed to the GBP/EUR currency pair’s weakness, which is trading 0.1% lower at EUR 1.1622.

Although rising COVID-19 cases, vaccine supply issues and the darkening economic situation in the EU should cap any upside potential in the euro (EUR), the UK will have to produce some positive data to give pound Sterling (GBP) a notable boost.

A renewed drop in Britain’s coronavirus infection rate could also prove pound-supportive as this would brighten the country’s recovery outlook.