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Russian gas embargo to impact Europe’s economy: IMF

Wednesday, 20 July 2022 4:36 AM [ Last Update: Wednesday, 20 July 2022 7:16 AM ]

This photograph, created on December 20, 2017, shows the logo of the Italian oil and gas company Eni in San Donato Milanese, near Milan, Italy, on October 27, 2017. (By AFP)

The International Monetary Fund (IMF) has warned that a Russian gas embargo could heavily impact central Europe, causing deep recessions in Hungary, Slovakia, the Czech Republic, and Italy.

A study by the IMF released in a blog posting on Tuesday showed that the partial shutoff of Russian gas deliveries was already affecting European growth, and a full shutdown could be substantially more severe.

In Central and Eastern Europe, in particular, there is a risk of shortages of as much as 40 percent of gas consumption and of gross domestic product shrinking by up to 6 percent, the study added.

The study went on to show however that the impacts of the gas cuts could be mitigated by securing alternative supplies and energy sources, easing infrastructure bottlenecks, encouraging energy savings while protecting vulnerable households, and expanding solidarity agreements to share gas across countries.

“Our work suggests that a reduction of up to 70 percent in Russian gas could be managed in the short term by accessing alternative supplies and energy sources and given reduced demand from previously high prices,” the researchers said.

Meantime, Hungary would suffer the most economically from a Russian embargo, with a reduction of more than 6 percent in gross domestic product (GDP), while Slovakia, the Czech Republic, and Italy could see their GDPs shrink by 5 percent if alternate gas supplies, including those of liquefied natural gas (LNG), are impeded from flowing freely to where they are needed.

Europe followed the US lead in Russian oil bans and gas curbs following the launch of Russia’s military offensive in Ukraine in late February.

Europe follows US lead in Russian oil bans, gas curbs

The UK has announced plans to phase out imports of Russian oil and oil products by the end of the year while the EU says it will reduce its dependence by two-thirds.

Europe is not all in agreement, though, about the anti-Russia stance. Hungary’s Prime Minister Viktor Orban has blasted the European Union for slapping sanctions against Moscow, insisting the bloc “shot itself in the lungs” by doing so.

“Initially, I thought we had only shot ourselves in the foot, but now it is clear that the European economy has shot itself in the lungs, and it is gasping for air,” said Orban, a strong critic of anti-Russia sanctions, in a recent interview with a local public radio.

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