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If EU Cuts Off Russian Gas It Will Cost Germany €225 billion And Trigger An EU-wide Recession

Even though the sanctions already imposed on Russia in respondse to the invasion of Ukraine are hitting the nations that imposed then harder that their intended target, the EU is preparing to committ economic suicide in an orgy of virtue signalling ...

Europe's biggest economy would suffer a 6.5pc contraction if Russian energy is suspended, experts warn 

olaf scholz
Germany's Chancellor Scholtz: Germany gets about one-third of its gas from Russia

A Reuters report published earlier this week revealed that the European Commission, de facto ruling committee of the EU has drafted proposals for a total embargo on oil and gas imports from Russia., However the report added there was no agreement among member states to impose such an embargo, many finance secretaries and energy minister in EU member states expressed support for the move but for others the move would have such a profound adverse effect on their national economies the proposal is unacceptable. The upshot is that as an indirect effect of the Ukraine conflict, the EU is heading for an unprecendented spilt over policy.

Cutting off Russian gas to EU nations will cost many member states dear, with Germany, which gets at a conservative estimate one third of its gas from Russia, taking the biggest hit, an estimated €220bn in lost output. Overall a ban on Russian gas and oil would trigger a recession across the Continent, due to the bloc's dependency on the Kremlin for energy.

Think tanks advising the German government said its economy would contract by 6.5pc as a result of losing access to of Russian gas. Credit agency Moody’s warned of energy rationing in countries reliant on Russia for supplies, in fact some smaller EU nations have already announced fuel rationing measures.

Overall Europe gets about 40pc of its gas from Russia and about 25pc of its oil, meaning it is providing the Kremlin with a vital source of cash while santions applied by the EU, USA and NATO in support of Ukraine are meant to end the war by starving Russia of revenue from its exports of essential commodities.

The EU has already set out plans to end imports of Russian coal but has so far failed to reach agreement on a full energy embargo. German finance minister Christian Lindner warned earlier this month that a ban on Russian fuel “would inflict more damage on ourselves than on them".

In a report released on Wednesday, economic think tanks said an immediate halt to Russian gas imports would trigger a "sharp recession" in Germany, with inflation partly caused by the war already impacting economic growth anticipated this year. Stefan Kooths of the Kiel Institute for the World Economy said: “The shock waves from the war in Ukraine are weighing on economic activity on both the supply side and the demand side.”

Separately, Moody’s warned the difficulties of replacing Russian energy supplies, particularly gas, would lead governments to prioritise households, hospitals and transport for supplies, forcing some manufacturers to curtail production or close.

Moody’s also warned an embargo would push oil prices to $160 per barrel this year, up from $106.90 on Wednesday, while gas prices in Europe would increase "significantly" from already high levels and remain high for at least the next two years.