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Complete shutdown of Russian gas pipelines to Europe ‘not unthinkable’

Complete shutdown of Russian gas pipelines to Europe ‘not unthinkable’

The G7 countries must prepare for the complete cessation of Russian gas pipelines in the near future, and this could have serious consequences for Europe’s economy, a CNBC analyst has warned.

“The G7 needs to prepare for a gas cut. The G7 could face an oil cut. There are other supplies that could be secured around the world, but the gas could be cut and that would have consequences. Jeffrey Schott, senior fellow at the Peterson Institute for International Economics, told CNBC.

“Russia has already significantly reduced the flow of gas to Germany and through Ukraine, so closing the pipelines is not unthinkable. Russia also sells some liquefied natural gas (LNG) in Europe, but not so much,” he said.

“A total cessation of Russian supplies would trigger gas bulletin purchases, at least in the short term,” he said. “Russian supplies would be partially offset by increased LNG imports, increased supplies from Norway and Algeria, and the conversion of fuels to coal,” he said.

Gazprom, Russia’s energy giant, has cut gas flows to Europe by about 60% in recent weeks. The move prompted Germany, Italy, Austria and the Netherlands to say they could return to coal.

As global pressure continues to target Russia for its invasion of Ukraine, Europe is facing “a very difficult situation,” Schott said.

“They are playing with time. The more hostility there is against Russia, the more Putin threatens and may further reduce gas supplies to Europe,” he added.

Strong concern in Europe

European leaders are increasingly worried about the possibility of a complete cessation of gas supplies from Russia.

Germany recently said it was moving to the so-called “alert level” of the contingency plan for natural gas, as reduced Russian flows exacerbated fears of a shortage of supplies in the winter.

On Thursday, the country’s economy minister, Robert Habeck, announced that Germany would move into the second phase of the three-phase plan – a sign that Europe’s largest economy now sees a high risk of a long-term shortage of gas supply.

It is noted that the EU receives about 40% of its natural gas through Russian pipelines and is trying to rapidly reduce its dependence on Russian energy in response to the Kremlin’s months-long attack on Ukraine.

Germany, which is heavily dependent on Russian gas, has previously sought to maintain strong energy ties with Moscow.

“The threat is that there will be a cut-off of gas before Europe runs out of gas, and that would be a threat to European growth and bring ‘consumption cards.'” threat, it remains to be seen, “said Schott.

Aiming at Russian gold

In a move to deprive the Kremlin of the revenue it needs to fund the war against Ukraine, G7 leaders are expected to announce further punitive sanctions against Moscow during the summit, banning imports of Russian gold.

“The action taken to stop the Russian gold market is a small step in the right direction,” Schott said, adding that it would help hurt the Russian economy.

Restrictions on Russian gold exports amount to about $ 15 billion a year for Moscow, said Creon Butler, director of economics and finance at Chatham House.

“This is potentially quite important,” he said, but stressed that this is not something that will necessarily be accepted by all G7 members.

“This shows the problem. There are many concrete things they can do, but whether they can achieve a unified G7 approach, let alone involve other countries, I think that will be a challenge,” Butler added.

Source: Capital