Two recent studies estimate that a ban on Russian energy imports would cut Germany’s GDP by no more than 3 percent.
Russian phasing out oil, natural gas and coal would cost EU countries roughly € 100 per capita, research. In this way, the economic impact of the Russian embargo on energy trade in the EU would be significant but manageable.
The ban on energy imports has risen again as the EU prepares for new economic sanctions on Russia over the Butchan massacre.
Different countries would feel the effects very differently. According to the study, the hardest hit would be in Lithuania, Bulgaria and Slovakia. In Lithuania, the disruption of Russian energy imports could cut the country’s total output by as much as five percent, and in Bulgaria and Slovakia by about 2.5 percent.
According to the study, Finland is also one of the countries where the impact would be higher than average. The total output of the economy could shrink by one percent. For some southern and western European countries, the import ban would have virtually no effect.
At the EU level as a whole, the embargo on energy trade in Russia would cut total production by 0.2–0.3 per cent. Gross domestic product per capita would shrink by about 100 euros.
Size from the point of view of the national economy, the effects of a possible embargo on energy trade would thus be rather limited, given the key role of Russian energy in Europe. About 40% of the natural gas used in the EU and a quarter of coal and crude oil comes from Russia.
According to researchers, this is explained by the adaptability of companies.
“Even in the short term, companies and the economy as a whole will be able to replace, albeit only partially, energy sources and intermediate and final products with others,” the researchers write.
In the case of oil and coal, Russian imports are relatively easily substitutable for other sources. In the case of natural gas, it is more difficult, but especially in the production of electricity, natural gas can be replaced by other fuels. Businesses and households are also changing their behavior: driving less, regulating heating less, or changing their supply chains.
“This replacement, although only partial, will help significantly mitigate the impact of the shock,” the researchers write.
The study was carried out by an independent panel of experts appointed by the French government and used a complex model involving the use of intermediates in 30 sectors in 40 countries. In this way, the study aims to model as accurately as possible how supply chains would react to the energy trade embargo.
Similar approach to use fresh German research, which assessed the impact of the energy embargo on the German economy. Both studies end up in the same rough order of magnitude: cutting off Russian energy imports to Germany would cut the country’s economic growth by 0.5 to 3 percent.
The impact would be smaller than the coronavirus pandemic, which reduced Germany ‘s GDP by 4.5% in 2020.
Germany has opposed the energy embargo on Russia because it considers its economic price too high.
According to a French study, the economic impact on Europe would be further mitigated if import duties were imposed on Russian energy instead of a direct import ban. In that case, the countries and companies that are most dependent on Russian energy would still be able to obtain it. Researchers estimate that the cost of import duties to Europe would be only a third or a quarter of the cost of an import ban.
According to researchers, the impact should also be mitigated by policy measures, such as support for the poorest households or workers in certain sectors such as the chemical industry. Some companies may face a direct crisis and may be supported by the state through loans or recapitalization.
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