WASHINGTON (Parliament Politics Magazine) – The International Monetary Fund has warned that a complete shutdown of Russian gas supply may cause a 6% drop in GDP and result in recession in the most vulnerable EU nations.
The IMF stated that Europe didn’t have a comprehensive plan to deal with shortages, the constant rise in energy prices, and the impact on growth. This statement came amid rumours that Russian President Vladimir Putin will keep the Nord Stream 1 pipeline shut after the conclusion of routine annual maintenance later this week.
The Washington-based organisation named the three EU nations most likely to suffer—Hungary, Slovakia, and the Czech Republic—but added that Austria, Germany and Italy would also have substantial repercussions.
The possibility of a historic total shutdown had people worried about gas shortages, price increases, and potential economic effects. Although governments were acting quickly, they lacked a plan to manage and reduce effect, said the IMF officials in a blog post.Â
 Their data revealed that there was a danger of shortages of as much as 40% of gas consumption and a GDP decline of up to 6% in some of the most affected nations in central and eastern Europe.
The effects, however, might be reduced by establishing alternative supplies and energy sources, alleviating infrastructure bottlenecks, increasing energy efficiency while safeguarding vulnerable households, and extending solidarity agreements to distribute gas among countries, the blog stated.
The IMF noted that despite a 60 percent decrease in Russian gas shipments since June of last year, the world’s energy infrastructure and supply has so far managed to keep up, but it emphasised the potential costs should the Kremlin weaponize energy supplies in response to western sanctions.
The fund has already lowered its estimate of world economic growth this year due to Russia’s invasion of Ukraine to 3.6%; a further reduction will be announced later this month.
Total gas usage fell by 9% in the first three months of 2022 compared to the same period the previous year, and alternative supplies, mainly liquefied natural gas (LNG) obtained from international markets, were being used.
The IMF said that a decline in Russian gas supply of up to 70% may be managed in the short term by gaining access to alternative suppliers and energy sources and reducing demand due to previously higher prices.
Diversification would be much more difficult in a complete cutoff, though. Gas bottlenecks caused by limited import capacity or transmission issues may make it more difficult to redirect gas throughout Europe, it added.
According to the IMF, in the event of a complete closure, the EU’s economic output over the following 12 months might decrease by roughly 3%. Some nations, like Sweden, Denmark, and Greece, would experience little to no growth impact, whereas Italy, with its heavy reliance on gas for electricity production, could experience a decline of over 5%.
The fund stated that depending on the accessibility of alternate supplies and the capacity to reduce residential gas usage, the effects on Austria and Germany would be less severe but still considerable.
According to the IMF blog, EU governments must intensify their efforts to secure supplies from alternative and global LNG markets, address infrastructure bottlenecks that prevent the import and distribution of gas, develop a plan for sharing supplies in an emergency, promote energy efficiency while safeguarding vulnerable households, and set up “smart” gas rationing schemes.
