A cutoff in Russian natural gas supplies could result in a hit of as much as 2.65% to the European Union’s economy, according to a working paper from the International Monetary Fund.
A halt would probably reduce gross national expenditure by at least 0.4% over one year, researchers Silvia Albrizio, John Bluedorn, Christoffer Koch, Andrea Pescatori and Martin Stuermer said in paper published Tuesday. Supplies of liquefied natural gas from other countries could cushion the impact, they said.
“Even with access to the global LNG market, gas prices in the EU would still rise about 100%,” the researchers said. “But they would increase substantially more without global market integration, climbing from 370 to 1,000% over their first-quarter 2022 levels.”
The EU is worried about a shutoff in energy supplies in retaliation for sanctions over Russia’s invasion of Ukraine. The Nord Stream pipeline is closed for scheduled maintenance and EU Budget Commissioner Johannes Hahn said Tuesday that he doesn’t expect Russia to restart the link on July 21 as planned.
A halt of Russian gas supplies to the EU could have a catastrophic impact on industry and countries are scrambling to find alternative supplies. Germany is particularly dependent on Russian gas and already the squeeze on supplies has prompted major utility Uniper SE to call for a government rescue.
In the IMF working paper’s worst-case scenario, Hungary would be hardest hit, followed by Slovakia, Croatia, the Netherlands and Bulgaria.