In this April 9, 2010 file photo, a Russian construction worker speaks on a mobile phone in Portovaya Bay some 170 km (106 miles) northwest of St. Petersburg, Russia, during a ceremony marking the start of construction for the Nord Stream pipeline.  - Sputnik International, 1920, 28.04.2022SubscribeUSIndiaGlobalConcerns over the stability of Russian gas supplies to Europe were recently prompted by Gazprom’s move to stop deliveries to Bulgaria and Poland – two countries which refused to follow a new rule requiring payment for the fuel “in rubles”. This policy was introduced in response to European sanctions on Russia.The European Union economy will plunge into recession should Russia decide cut off its gas supplies, which amount up to 40% of European countries’ demand not just for heating, but also for energy generation, economists for Berenberg Bank said.Europe is already experiencing economic shocks from food and energy inflation, which had been exacerbated by the start of the Russian special operation in Ukraine, the economists said. The situation has the hallmarks of “stagflation” – a special term that describes economic decline and high inflation at the same time. However, without Russian gas, the EU economy will dive into a recession for years to come, Berenberg warns.”A sudden stop of Russian gas supplies to Europe could push Europe into a recession. The precise impact of such an immediate gas embargo is hard to predict”.Gazprom’s recent decision to cut supplies to Poland and Bulgaria over their refusal to follow new rules for paying for the gas “in rubles” was designed to show that Moscow was ready to fulfil its promise to shut off the valve if its new demands are not met. Specifically, the gas-buying countries now have to deposit their payments not in a European subsidiary, but in the head office of Gazprombank in Russia and then convert it into rubles.The rule only concerns the countries that imposed sanctions on Russia, including the freezing of its Central Bank’s reserves, and which Moscow calls illegal.Berenberg Bank’s economists have assessed that the impact of the sudden removal of Russian gas from the EU would lower the European economy’s growth by 3 percentage points in 2023. They suspect it would deliver a “major hit” to the EU’s economic activity, although it should eventually recover from the blow.The removal of such volumes of gas are likely to prompt the governments of some European countries to implement fuel rationing in 2022, Edward Gardne, the economist for Capital Economics Commodities, in turn suggested.”If Russia cut off gas exports to Germany, the government would probably ration gas consumption. Households would probably be protected, so industry (especially chemical and metallurgy) would be worst hit, causing a deep recession”, Berenberg economists said.Moscow’s decision to shut off the valve for the EU will hit mostly during winter, where “catastrophic pricing” could potentially be seen amid lack of gas supplies and already high energy prices, CEO of Skylar Capital Management, Bill Perkins, told CNBC.”If Russia shuts off the gas and oil, Europe is going to be scrambling this winter to maintain heating, and just maintain their economies”, he suggested.Perkins further stated that it was difficult to see “how the market balances” without running out of gas in case Moscow decides to halt supplies to the EU.Poland and Bulgaria so far are the only European countries that have refused to pay for gas in accordance with Moscow’s new scheme, claiming that it would violate the sanctions that the EU put in place over the Russian special operation in Ukraine. The EU authorities remain apparently undecided whether that is actually the case, since last week Brussels issued a notice that proposed a way to fulfil Kremlin’s demands and not violate sanctions, while this week the EU again claimed that it was impossible.



Please enter your comment!
Please enter your name here