According to a report by five German economic institutes, such a shock would cause the country to lose 220 billion euros in economic output over the next two years. German GDP would only increase by 1.9% in 2022 and shrink by 2.2% in 2023. Growth would be 2.7% this year if gas keeps flowing.
A cut in Russian gas would plunge Europe’s largest economy into a “sharp recession,” said Stefan Kooths, research director at the Kiel Institute for the World Economy and one of the report’s authors.
EU leaders agreed to phase out all Russian coal imports. An EU source told CNN Business that coal would be banned until August. A new, sixth round of sanctions is already under discussion, and some EU officials have called for action on Russian oil and gas exports.
However, a short-term ban on Russian gas would wreak havoc in Germany, which depended on Russia for about 46% of its natural gas in 2020, according to the International Energy Agency. It uses the fuel to heat homes, generate electricity, and power its factories.
The European Union is already trying to cut Russian gas imports by 66% this year and completely break its dependency on Russian energy by 2027.
Last week, Germany’s Finance Minister Christian Lindner said the country was moving “as fast as possible” to dismantle Russian energy but poured cold water on a sudden halt.
“The question is, when will we do more harm to Putin than to ourselves?” Lindner said in an interview with the newspaper Die Zeit.
“If I could only follow my heart, there would be an immediate embargo on everything. Whether this would stop the war machine in the short term is questionable,” he added.
An attack on Russian gas supplies would likely exacerbate inflation in Germany, which last month hit its highest level in more than 40 years. Consumer prices rose 7.3% year-on-year, data from the country’s statistical office showed.
The main culprit: Soaring prices for natural gas and oil, which are up nearly 40% over the same period.
BDEW, an association of German energy and utility companies, said last week it was “ready to work out a detailed plan” to phase out Russian gas quickly, but urged politicians to tread carefully.
“At long last, [cutting Russian gas] it is about nothing less than the transformation of the entire German industry,” said BDEW President Marie-Luise Wolff in a statement.
— Chris Liakos contributed to the coverage.