EU admits impact of 2/3 Russian gas cut ‘has not been assessed’

EU admits impact of 2/3 Russian gas cut ‘has not been assessed’

The European Commission has failed to carry out an economic impact assessment of its initiative to cut Russian gas imports by two-thirds by the end of the year, the first stage of its €300 billion plan. euros aimed at totally eliminating Russian energy imports by 2027, EURACTIV has learned.

Instead of an evaluation, the Commission carried out a ” simulation “ in its spring economic forecast which takes into account the impact of a sudden stop in imports of all Russian gas.

“Compared to an abrupt halt in Russian gas imports, a 2/3 phase reduction would be much smoother, as businesses and consumers would have time to prepare, and governments could secure critical infrastructure for alternative imports. »a Commission spokesperson told EURACTIV.

Germany is shaking

However, Unionvl companies are wary of the future economic fallout from this measure.

Since the start of the war in Ukraine, Germany has reduced its dependence on Russian gas imports by around 35%, which accounts for more than half of all gas imports.

By the end of the year, Berlin plans to further reduce its imports to reach 30% of its total gas imports, almost half of what it imported last year.

However, the decrease in dependency achieved so far is partly due to a drop in demand from German industry.

“Due to the rapid increase in gas prices, the demand for gas is incessantly declining anyway, by up to 10% in the industry during the first months of the war alone”Claudia Kemfert, head of the energy, transport and environment department at the German Institute for Economic Research (DIW), told EURACTIV.

Meanwhile, German companies are criticizing the Commission’s plan to cut Russian gas imports by two-thirds until the end of the year.

“The European Commission’s strong will and plan to cut off Russia’s silver supply through an energy embargo will not pass businesses unscathed”Marc S. Tenbieg, executive director of the German Association of Small and Medium Enterprises (DMB), told EURACTIV.

Even if an alternative to Russian gas imports were found, a gas embargo “would not only lead to considerable additional burdens for the German economy in the short term, but also to compensation demands from companies”he added.

According to Mr. Tenbieg, the European Commission’s plan to reduce Russian gas imports is wishful thinking.

“While a reduction of this magnitude is certainly possible with very great effort, it is not possible in the short time available”did he declare.

“Unfortunately, what has led to energy dependence for decades cannot be dissolved in a few months”added Mr. Tenbieg.

However, analysts are convinced that such a reduction is sustainable under certain conditions.

“It is possible to reduce imports of Russian gas, or even do without it altogether”, Ms Kemfert told EURACTIV. To achieve this goal, Germany should increase its LNG imports, fill gas storages, introduce gas-saving measures and invest heavily in renewable energy.

The removal of Russian gas could lead to losses of up to 5% of the gross national product in Germany and considerable negative repercussions in other European countries.

Economic performance down even without Commission push for accelerated Russian gas phase-out “due to the very strong global increase in the price of fossil fuels and the associated inflation”underlined Ms. Kemfert.

“The better and more intensively we prepare for a gas embargo, the weaker the negative effects on the national economy will be”underlined the economic analyst.

Cold shower for Italian growth

Other major European economies could be hit even harder.

Italy’s slowing GDP growth will be more evident than in the rest of Europe due to the country’s energy and economic ties with Moscow, Economy Commissioner and former Prime Minister Paolo Gentiloni said during the the Italian Banking Association (ABI) in Rome on Monday.

According to Confindustria’s economic forecasts in the event of a possible shutdown of Russian gas, Mr. Gentiloni said he expected “a significant impact on growth prospects this year, especially for a country like Italy which is among the biggest importers of Russian gas in Europe. »

“A worst-case scenario that simulates the impact of rising energy prices for a longer period, as well as a complete shutdown of gas supplies from Russia, would result in negative growth for this year”he added.

Mr. Gentiloni recalled that the European Commission expects the Italian economy to grow by 2.4% in 2022 and less than 2% in 2023.

The former Italian Prime Minister also reiterated the Commission’s call on EU member countries to adopt more “prudent”with Brussels having halted the bloc’s fiscal rules until the end of 2023. Highly indebted countries like Italy “must pay particular attention to public finances in these circumstances”, he added.

No gas on the agenda

After weeks of intense discussions and disagreements, late last night EU leaders finally reached a political agreement to impose a partial ban on Russian oil.

A move to also ban Russian gas is not “not realistically on the table”a European diplomat told EURACTIV yesterday.

“If there was such a mess with Russian oil, imagine what would happen with a proposed gas ban”another diplomat representing a southern EU member state told EURACTIV on 17 May.

“The 7th package of sanctions against Moscow will be extremely difficult […] We are very close to reaching our limits. What will the 7th package include? »wondered the diplomat.

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