IMF warns Russian gas embargo would lead to recessions in Europe

International Monetary Fund warned that a Russian gas embargo would lead to severe recessions in eastern Europe and Italy if countries around the world hoarded their own scarce supplies. The IMF predicted that unless liquid natural gas was shared and prices were artificially held down, any Russian action to stop supplying Europe would trigger economic contractions over the next year in the Czech Republic, Hungary, Slovakia and Italy.  Agency reported that Russia’s Gazprom had told customers in Europe it could not guarantee gas supplies because of “extraordinary” circumstances, adding to fears that Moscow may not restart the Nord Stream 1 pipeline on Thursday. 

European gas consumption has already fallen 9 per cent this year, knocking 0.2 percentage points off EU GDP, according to the IMF, but its simulations warned that without mitigations, the pain could become much worse in the winter. Brussels is next week set to tell member states to cut consumption “immediately”. The IMF modelling suggested that the European economy could manage with Russia curtailing supplies by 70 per cent, but there would be shortages if there was a full embargo on exports. The worst affected European countries would only be able to access supplies between 15 and 40 per cent below their needs.