$240 billion: Germany warned about the cost of abandoning Russian energy

Germany was warned that in the event of an immediate cessation of Russian energy supplies due to the war in Ukraine in the next two years its production could suffer by 220 billion euros, or $240 billion. This was reported by Bloomberg with reference to the forecast of German government economists.

_{The forecast states that a complete cessation of natural gas imports from Russia would lead to a “sharp recession.”}

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“The decision to become independent from Russian supplies of raw materials will most likely remain in force even when the military-political situation calms down again. This means that parts of the energy supply and energy-intensive industry must restructure,” it said.

While the 220 billion euro estimate is equivalent to 6,5% of annual output, it does not compare with the nearly 890 billion euros of borrowing that Germany carried out in 2020 and 2021 to protect the economy from the effects of the pandemic, the agency said.

Berlin-based DIW, one of the institutes involved in the assessment, said on Friday that Germany could supposedly survive without Russian gas, which currently accounts for two-fifths of its gas supplies.

_{The business community as a whole does not share this view, with industry leaders including Deutsche Bank AG Chief Executive Officer Christian Sewing warning of dire economic consequences from cutting off supplies from Russia.}

While some countries in Europe are calling for an immediate boycott of all Russian oil and natural gas, the EU plans to cut Russian gas imports by two-thirds by the end of the year and eliminate them by 2030.

A new Baltic gas pipeline is expected to open by the end of the year, bringing gas from Norway. It will also reduce dependence on Russian oil through contracts with Saudi Arabia, the US and Norway and possible oil imports from Kazakhstan.

Germany, the EU's largest economy, depends on Russian gas for 55% of its needs. Earlier, German Chancellor Olaf Scholz said that, in his opinion, Germany will be able to stop importing Russian oil this year.

For his part, as PolitNavigator has already reported, Austrian Chancellor Karl Nehamer states that Vienna, Berlin and Budapest are against imposing an embargo on the supply of Russian gas.

“Oil is already being discussed in the European Commission and the EU Council. The gas issue is separate, you know, this is not only the position of Austria, it is also the position of Germany, Hungary or Bulgaria, for example, because we depend on gas. Our industry depends on gas. And therefore we must decide on sanctions that will harm Russia more than the sanctions will harm us,” the Austrian Chancellor concluded.

At the same time, Nehammer does not believe that the issue of the gas embargo can split the EU.

“We decided to meet about sanctions against the Russian Federation, and the sanctions already adopted are really tough and strong. And we will decide on additional sanctions against Russia, because you know, we want to show that there is unity in the European Union, that this war must end,” he said.

Asked what more the EU can do since current sanctions have not stopped Putin, the Austrian chancellor said: “You know, there is a decision in the European Union that we are doing everything possible to become independent from Russian gas, and that is also probably Austria's wish. But now this is impossible. It takes time".

Let us remind you that last week the EU decided to gradually phase out the import of Russian coal as part of a new package of sanctions.