Russian finance expert explains how to stop Vladimir Putin
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Russia supplies Europe with around a third of its natural gas and is in control of a vast network of pipelines the EU relies on for the delivery of the energy source. The European Central Bank (ECB) has warned that if Mr Putin cuts gas volumes transited through these networks, the value of goods and services produced in the eurozone could plummet. The move would also likely send energy prices soaring further after they already reached record highs over the previous months in an ongoing energy crisis.
According to the ECB, the surging energy prices would slash the eurozone economic output by around 0.2 percent this year compared with baseline levels of GDP.
And it warned that because 90 percent of eurozone gas is imported, its economy would be dealt a huge blow if supplies plummet.
This comes after European Commission President Ursula von der Leyen threatened “massive economic and financial sanctions” if Russia launched a military attack on Ukraine.
With reports emerging of 100,000 Russian troops piling up on the Ukraine border, the West has been scrambling to prevent an attack by issuing these stark warnings.
But the ECB warned these measures might backfire.
And because Ukraine is a key transit country for Russia’s gas to enter the EU, fears supplies could be disrupted have been sent soaring over this too.
The Kremlin has already been partially blamed for the EU’s energy crisis as bills soared for millions across the bloc.
Gazprom, Russia’s state-owned energy giant, reportedly diverted gas flowing through the Yamal-Europe pipeline to the East, away from the West.
Gas flow has been in reverse since December, seeing record prices that month even surpasses the October record.
The ECB, which supervises 115 of the biggest banks in the eurozone, said: “The direct and indirect impact of a hypothetical 10 percent gas rationing shock on the corporate sector is estimated to reduce euro area gross value added by about 0.7 percent.”
The bank warned that Austria and Slovakia be hit the hardest.
It also said industrial sectors like basic metals would be dealt the biggest blow.
This also comes as German Chancellor Olaf Scholz met with Mr Putin in Moscow today in a bid to fend off a Russian attack on Ukraine using diplomacy.
But Mr Scholz has come under fire for refusing to state whether he would abandon a controversial gas project his predecessor Angela Merkel struck with Mr Putin.
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Nord Stream 2 is the £8billion pipeline that will send Russian gas to Germany via the Baltic Sea, bypassing Ukraine and Germany.
Moscow claims it could ease the energy crisis and double Europe’s gas volumes.
But critics say the pipeline would hand Mr Putin even more control over the European energy market and boost EU dependency.
The US has called on Berlin to scrap the project, which has not yet come online, a threat it claims gives the West leverage over Putin.
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