29.07.22 Review

IMF described scenarios for a complete halt to Russian gas supplies and its consequences for Europe: with market integration and higher consumer prices the damage will be half as much

The threat of a complete halt to Russian gas exports to Europe, a scenario of "gas blackmail" predicted by Re: Russia — is becoming the focus of attention for European politicians and experts. If certain conditions are met, Europe can cope with a 70% reduction in gas supply, but has no strategy in the event of a complete halt, says a summary of three IMF studies.

If such a scenario were to be realized, Russian gas dependent economies of Central Europe would suffer the most — and it would cost them 5-6% of the GDP.

To mitigate the consequences of a supply halt, the European energy market should be better integrated and available gas should be redirected to areas where energy shortages are more acute. At the same time, experts advise shifting most of the price increase to the households — the only way to achieve real savings — and developing targeted assistance programs for the most vulnerable among them. In this "high solidarity" scenario, the cumulative losses of European economies would be 2-3 times lower, experts write.