Business & Economy

IMF warns full shutdown of Russian gas to Europe could ‘shrink’ economies

Washington, Jul 19 (EFE).- A long term, full cutoff of Russian gas supply to Europe could have devastating effects on the economies of several countries in Central and Eastern Europe, the International Monetary Fund (IMF) warned Tuesday.

“A longer full shut-off of Russian gas to the whole of Europe would likely interact with infrastructure bottlenecks to produce very high prices and significant shortages in some countries,” the IMF said in a report published Tuesday.

“With natural gas an important input in production, the capacity of the economy would shrink,” it added.

According to the report — Natural Gas in Europe: The Potential Impact of Disruptions to Supply — Hungary, Slovakia and the Czech Republic would be the worst affected by a total cutoff of Russian gas and would face a risk of gas shortages of up to 40% and a fall of their gross domestic product (GDP) by up to 6%.

The impacts on Austria, Germany and Italy would also be significant, the report warned, “but would depend on the exact nature of remaining bottlenecks at the time of the shutoff and consequently the ability of the market to adjust.”

Other countries, such as Spain and France, are “unlikely” to face such constraints and the fall in their GDP would account for less than 1%, the IMF said.

Russia is the EU’s largest supplier of gas. In 2020, over 40% of total imports of natural gas came from Russia.

While Russian gas deliveries to EU countries have already reduced — or stopped in the case of Poland, Bulgaria, Finland, Denmark, and the Netherlands — the IMF warns that “immediate further action” is needed to mitigate the challenges of a longer term shutdown.

Russian pipeline exports to Europe have already dropped by 60% compared to June 2021.

Earlier this month, the Nord Stream 1 pipeline, the biggest single flow of Russian gas to Germany, suspended its gas supply due to maintenance work.

The shutdown is expected to last 10 days but some European countries, like Germany, fear Russia will extend it. EFE


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