There is a risk of losing a third of Russian gas exported to the European Union

According to Yuri Vitrenko, CEO of the Ukrainian public group Naftogaz. A third of the gas exported from Russia to the European Union is at risk of being lost due to the conflict in Ukraine.

“We estimate that a third of the gas exported from Russia to the European Union through Ukraine will be lost if the (Russian) occupation forces do not stop disrupting the work of the stations in the recently occupied territories,” he said. Yuri Vitrenko wrote on Twitter.

Since the offensive began on February 24, Russian forces have significantly gained control of parts of the Ukrainian territory in the south of the country. They also continue their offensive in the east, where they made the Donbass, which make up the Donetsk and Lugansk regions, a priority target of the war.

While some European Union countries such as Germany, Austria and Italy for example rely heavily on Moscow in terms of energy, the 27 countries have set themselves the goal of reducing their imports of Russian gas by two-thirds by the end of the year. . The main outlet for Russian hydrocarbons that provide significant income to Moscow, the European Union decided in early April to stop its coal purchases in August, but has not yet decided on a gas and oil embargo.

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Cessation of Russian gas imports “soon” to the European Union (Charles Michel)

Kyiv is demanding a halt to imports of Russian oil and gas, but European countries, including Germany, are warning of a violent recession that such a ban could cause. European Council President Charles Michel, who is visiting Kyiv on Thursday, confirmed that sanctions will soon target Russian oil and gas exports, as demanded by Ukrainian President Volodymyr Zelensky. Also on Thursday, Italy, one of Europe’s largest gas consumers, announced that it would “soon” stop buying Russian gas for “ethical reasons”. For its part, the Dutch government announced, on Friday, its ambition to end its independence from Russian oil, gas and coal by the end of the year, by focusing on providing energy and sustainable energies and increasing imports from other countries.

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Germany does not plan to dispense with Russian gas before mid-2024

On the other hand, the German government of Olaf Scholz is a major opponent of an immediate halt to imports, believing that the country’s economic and social peace is at stake, with consequences for other EU economies. Germany does not plan to do without Russian gas before mid-2024, according to Berlin. This refusal infuriated Kyiv and many European governments.

An immediate European ban on Russian gas could already cost Germany dearly, as much as 5% of its gross domestic product this year, according to an estimate published by the Bundesbank on Friday.

The Bundesbank clarified in its April monthly economic report that “Germany’s real GDP could be up to 5% less than expected” in the event of a voluntary or sudden stop in Russian gas imports. She added that this represents a loss of “180 billion euros” of national production.

In such a scenario, the German economy could post a recession of 2% this year, the study estimates. According to the institution, inflation, which is already accelerating in the country, may gain “1.5 points in 2022”, and “2 points in 2023”, compared to a scenario without a ban.

Germany, the weakest link in Europe

Germany, and especially its industry, is particularly dependent on this resource, which, before the conflict, represented 55% of its total gas imports.

“I don’t see at all how a gas embargo can end the war,” German Chancellor Olaf Schulz repeated Friday in an interview with the weekly Der Spiegel.

“We want to avoid a dramatic economic crisis, the loss of millions of jobs and factories that will not open again,” he added.

However, Germany has already reduced its Russian imports, in the first quarter of 2022, to 40% of the total, by intensifying its efforts to find other suppliers, such as Qatar or the United States. The country also recently issued an envelope of three billion euros to equip itself with floating terminals for large quantities of liquefied natural gas (LNG), which it does not have at the moment.

International Monetary Fund: The European Union can do without Russian gas in the next six months

For Alfred Kamer, the European director of the International Monetary Fund, Europe could do without Russian gas in the next six months, but doing without it would have a very significant impact.

“Over the next six months, Europe can live with a complete shutdown,” the head of the German International Monetary Fund said in an interview with AFP on the sidelines of the Spring Meetings in Washington.

In the summer, the needs are less and European countries can also count on their stocks. However, the official warned that reducing inventories to critical levels would put strong upward pressure on prices that have already reached record levels.

“On the other hand, if the outage continues until winter, or even longer, it will have significant (negative) effects” on the European economy, Alfred Kamer continued, noting the serious reductions in risks during the winter. The International Monetary Fund has estimated that a complete disruption of Russia’s gas and oil supplies could cost the EU economy 3%.

Estimating the impact is still subject to significant uncertainty as we cannot, for example, predict today whether the upcoming winter will be long and harsh.

But in the face of the potential impact on the economy, Alfred Kamer recommends alternative emergency measures.

He admits that “no single option is likely to have a significant impact” on its own. “But accumulating many small actions will have a greater impact.”

He asserts that one of the measures is to search for alternative sources of supply and countries have already begun to do so by resorting to Algeria or Norway.

Consumers also have an important role to play in participating in the collective effort.

Governments can raise awareness among their population through “media campaigns to reduce energy consumption”.

The head of the foundation insists that “the consumer can act now.” “Reducing energy consumption also makes it possible to store more gas (…) which makes it possible to mitigate the effects of possible subsequent reductions.”

no stagnation

To speed up their energy transmission, support could be given to the most vulnerable, he suggests.

All these measures have a “modest” effect if they are taken independently of each other. But if we add together, there will be a cumulative effect.

Although the war in Ukraine has significantly slowed growth in Europe, Alfred Kamer believes that “the recovery will not be derailed.”

“We are not experiencing a recession,” he added. Major Eurozone economies, with the exception of Spain, will be “weak in 2022” and a quarter or two of near-zero growth or even technical stagnation with two negative quarters will not be ruled out.

But the International Monetary Fund expects these economies to recover in the second half of this year.

(with AFP)