Russia continues to tighten the screw on gas flows in Europe as exports decline. Gas giant Gazprom sends gas to Germany at just 20% of the capacity of Nord Stream – the pipeline that connects Russia to Germany – and many other European countries are now bracing for their own crises. Not only do experts fear that Europe could be plunged into a crippling recession, but many are warning that European countries will have to ration their gas consumption to survive the winter.
Other experts, however, believe that Russia and its President Vladimir Putin have more to lose if they turn off the taps.
Yale University economists Jeffrey Sonnenfeld, Steven Tian and Michal Wyrebkowski tell Express.co.uk that Russia’s funding for its invasion of Ukraine will take a hit if Europe no longer matters of Russian gas.
They recently authored a study claiming that Russia would face “economic oblivion” under Western sanctions, also pointing out that Russia is more dependent on Europe for gas exports than Europe for gas imports. Russian.
Speaking to Express.co.uk, they explained how Europe no longer buying Russian gas will have a direct impact on Putin’s invasion of Ukraine.
On whether Russia’s war effort could suffer, Mr Wyrebkowski said: “It’s certainly a medium to long term impact, we have to consider that Putin still has foreign currency reserves, but he burned them at an incredible rate.
“Half of the reserves – worth around $300bn (£247bn) – are essentially frozen by the West, and from the start of the war Putin essentially burned the roughly $75bn dollars (£62 billion) during the conflict with Ukraine.
“If we’re talking about a time scale of two, three or four years, we could see the collapse of oil and gas, it will certainly have an impact on Russia’s ability to launch military action in Ukraine.”
Mr. Sonnenfeld, who led the Yale study, also explained how the various sanctions imposed on Russia will hurt its wider economy.
He added: “It just shows their inability to make payments, to receive compensation, that they have become such a rogue nation.
“Not being part of the global financial flows is devastating, they are in deficit as they are.
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“They are an uninvestable asset because they are in default, China won’t bail them out, that’s a huge problem. Other than cutting their dependence on gas and oil exports, all they have to contribute to the world market, these are cereals and cyberterrorism.
“If they can’t access any funds, they’re really in trouble.”
Although Putin put up a typical strongman front during the war, it seems others in Moscow are worried about the economic reality his decisions will have.
Russia’s central bank warned this week that its economic contraction will worsen in the third quarter of 2022, risking a devastating recession.
In the third quarter of 2022, Russia’s GDP (gross domestic product) is expected to fall by 7%.
The central bank report added: “According to the Bank of Russia’s updated forecast, the contraction in 2022 will be less deep than forecast in April.
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“At the same time, the impact of supply shocks can be more prolonged in time.”
EU figures are also confident that Russia will feel the pain of the sanctions.
Josep Borrell, the EU’s foreign policy chief, told DW this week that Russia would “suffer the biggest recession since the World War or the end of the Soviet Union”.
He added that although Russia has cash, it is unable to use it in European markets: “They have cash, but they cannot buy anything.”