Thursday, March 28

The IMF warns that there will not be enough gas in Europe next winter if the supply from Russia is cut


The IMF warns that there will not be enough gas in Europe for expected demand next winter if supplies are cut off from Russia for a year as a result of the invasion of Ukraine and Western sanctions. The agency explains that “a significant reduction” in consumption would be necessary in this extreme scenario and points to Germany, Hungary, the Czech Republic and Slovakia as the countries that would suffer the greatest restrictions, due to their greater dependence on Russian gas imports and interconnection of its distribution networks with the country presided over by Vladimir Putin.

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In the report on the impact of the war in the region, published this Friday, the IMF explains that “imports arriving from Russian gas pipelines [el mayor proveedor de Europa] could be replaced (perhaps as much as two-thirds) with increased non-Russian pipeline imports, an increase in liquefied natural gas imports, and a shift of energy sources in electricity generation.”

In this calculation, Europe could not cover 66,000 million cubic meters of demand (66 bcm, in the US measure and more internationally), which leaves only one alternative: “Governments would resort to rationing consumption” (see graph).


“The real gas deficit will depend on several factors that are difficult to forecast, such as climatic conditions, the specific political responses of each country, as well as its ability to replace Russian gas imports,” details the IMF.

The impact on economic growth in 2023 of a supply cut would range between 1 and 6 points for Germany, for which an increase in activity of 2.7% is expected for that year. Meanwhile, it would be up to 3 integers for the eurozone as a whole (2.3% growth in the central scenario of 2023).




Spain is one of the countries in the region that would better withstand this blow, due to less direct dependence, although it would suffer from the rise in prices on international markets and their transfer to the electricity bill, which the Government hopes to limit when the Commission The European Union approves the “Iberian exception”. And also oil in a context of maximum tension. Without a supply cut, the expected growth is 4.8% in 2022 and 3.3% in 2023.

Rising prices

Europe could save a gas cut this summer, and for up to six months, but halving the increase in reserves, compared to previous years, in which it saved an average of 55 bcm in the summer period.

Uncertainties about Europe’s capacity to meet Russia’s supply appear, according to the IMF, in that “the increase in imports of liquefied natural gas means that producers can expand production in an already stressed global market”, and also in that “The switch to alternative energy sources (nuclear, biofuels, renewable energies and other hydrocarbons) depends on overcoming the restrictions to delay the closure of plants, the feasibility of the costs and the possible compensations with the green transition plans”.

“A total interruption of Russian gas could be managed in the next 6 months, although the reduction of reserves to critical levels would result in strong upward pressure on prices,” adds the international organization.

The Bundesbank warns of a strong recession

On the same issue and in a very pessimistic tone, the Bundesbank, the German central bank, warned in its latest monthly bulletin, published this Friday, that an embargo on Russian gas would affect gross domestic product by 5 points in 2022 , “which would trigger a rise in energy prices and one of the deepest recessions in recent decades.”



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