For several months, the Kremlin’s strategy has been that of a surgical cut of supplies (around 25%) but the war would take us into uncharted territory
A war that many thought unthinkable finally began. By attacking Ukraine, a sovereign country on multiple fronts, Russia is dragging Europe into a nightmare scenario, in which even the worst hypotheses must be taken into account. If Western countries, as promised, impose heavier economic sanctions, Russia could react in ways that further escalate the confrontation. From her he has the advantage that some of his exports are decisive and scarce inputs for European production. We are talking above all about gas, of which Russia satisfies about 30-40% of consumption on our continent. For several months, the Kremlin’s strategy has been that of a surgical cut in supplies, around 25%, which has helped to keep gas prices high and put Europe under pressure; among other things, allowing Gazprom, the largest Russian company by turnover, to make record profits and revenues in the last quarters of 2021. But the war takes us into uncharted territory, therefore further drops in supplies (or perhaps even a block ) are no longer so far-fetched. Maybe because of the European sanctions or Putin’s reprisals, or directly because of the military clashes in Ukraine.
And to think that just before the attack, the gas condition in Europe, according to several analysts, was slightly improving. This is thanks to all the liquefied natural gas – at least half coming from the United States – transported by tankers. Indeed, according to Wood Mackenzie, an energy research company, supplies of liquefied natural gas to Europe have exceeded those arriving from Moscow in January and February of this year. However, the Russian contribution remains fundamental. Out of a European Union requirement of about 400 billion cubic meters a year, Russia now guarantees the equivalent of 130 billion cubic meters a year and before the crisis it supplied 160. A contribution, even in the medium-long term , really difficult to replace. “Since 2014 our dependence has even grown… other than diversification”, points out Matteo Villa, co-director of the ISPI Data Lab, an international politics think tank.
What would happen then if, for example, the gas flowing from Ukraine were cut off? The analyst consensus is that Europe should be able to absorb the blow. Maybe with rising prices, but without a crisis in the availability of raw materials. Only 8% of Russian gas supplies pass through Ukraine today. A huge drop compared to 2014, when the share was 80%, then dropped to 40% in 2019. “Russia can close everything in Ukraine and not miss a drop”, explains Matteo Villa.
However, prices would remain subject to flare-ups at the least unexpected. “Without additional gas from Russia, Europe would be exposed to changes in the market and weather conditions throughout the coming winter, just like this winter, and with prices that will remain high and unstable,” says Kateryna Filippenko, a researcher specializing in Wood Mackenzie gas.
It is quite another matter, however, if there was a real blockage of supplies. According to analysts, we would be able to survive the winter by running out of reserves, but in September and October the situation would become unmanageable. At that point, gas storage would be close to zero. Very high gas prices, rising inflation, a spiral of massacre that in theory does not suit anyone. There would almost certainly be no other remedy than austerity: “moderate supplies, times of the day when no gas arrives and factories closed every other day”, Matteo Villa speculates. “But it is a scenario that in reality does not even suit Russia very much. This is not Putin’s goal ”. Furthermore, if geopolitics remains so tense and Russia continues to reduce supplies (or cut them off), Europe would seriously look around for alternatives. “It would send a clear signal to liquefied natural gas producers around the world to invest more and target the European market”, explains Massimo Di Odoardo of Wood Mackenzie.
In the meantime, however, a moderate simulation of austerity has been carried out by the European Central Bank itself. We tried to calculate the economic impact of a cut of about 10% of the overall use of gas. Among the large European countries, according to the ECB, Italy would be the most affected, with a drop in GDP close to 0.8 per cent. France would follow (despite nuclear power), Spain and Germany.
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