Feasibility

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TL;DR: Russian energy embargo is feasible both technically and economically, and popular counter-arguments do not stack up


Economical studies

Numerous studies by different research institutes and think tanks show that immediate embargo of Russian gas, oil and coal would be manageable. The costs are estimated comparable or below Coronavirus protection measures (e.g, -0.5% to -6% GDP in Germany). A moderate recession of -2 % to -3 % in 2023 would be followed by a quick recovery in 2024. Importantly, many earlier studies analyzed the impact of an embargo starting from March/April 2022. Banning Russian energy now (July) would be even easier/cheaper: EU gas storage filling levels increased from 25% in March to >60% as of mid-July [1]. Cynically, this "improvement" was paid by thousands of Ukrainian lives.


Author Publication date Embargo start Scope Energy type Title Estimated impact
ENTSOG[2] October 2022 Europe Natural gas Winter Supply Outlook 2022/23 Demand reduction of ca. -15% efficiently mitigate the risk demand curtailment in EU countries during winter

season. Europe would be exposed to 4% - 13% demand curtailment only during a peak day under Russian supply disruption

ECONtribute[3] 05.08.2022 August 2022 Germany Natural gas Wie es zu schaffen ist Required consumption reduction (Aug 2022 - Apr 2023): -25% on average (Electricity: -45%, Households: -16%, Industry: -26%)
GDP: similar to March 2022 study (-0.5% to -3%)
Bundesnetzagentur[4] 03.08.2022 21.07.2022 Germany Natural gas Gas-Szenarien von Juli 22 bis Juni 23 No gas shortage in scenarios without Nord Stream 1, but with proportional export reductions and 20% savings (since 07/2022) and 16 GW of LNG (since 01/2023).
As of 21.08.2022, storage level is at least 5% higher than predicted in the most optimistic scenario.
Fraunhofer IEG & SCAI
TU Berlin[5] 		July 2022 2022 Europe Natural gas European gas supply security given interrupted supply from Russia European demand can be covered w/o russian gas, and required adjustments of the distribution network are technically feasible.
Requirements: European collaboration and -20% consumption vs. 2021
IMF[6] 19.07.2022 July 2022 Germany Natural gas The Economic Impacts on Germany of a Potential Russian Gas Shutoff GDP (vs. baseline): -1.5 % in 2022, -2.7 % in 2023, and -0.4 % in 2024
Inflation: +2 % in 2022 and 2023
IMF[7] 19.07.2022 July 2022 Europe Natural gas Natural Gas in Europe: The Potential Impact of Disruptions to Supply Up to 70 % could be replaced from alternative sources, no shortages for around 6 months.
Longer term: from below 1% up to 6% GDP depending on the country
Bruegel[8] 07.07.2022 July 2022 Europe Natural gas European Union demand reduction needs to cope with Russian gas cuts Without Russian gas, the European Union would have to reduce demand by approximately 15%, with big differences between different parts of Europe
Gemeinschaftsdiagnose[9] 28.06.2022 July 2022 Germany Natural gas Zur Gefahr einer Gaslücke in Deutschland bei einem Wegfall russischer Lieferungen – Sonderauswertung Juni 2022 The gas gap does no longer exist, nonetheless price increases should be propagated to consumers soon.
vbw[10] 28.06.2022 July 2022 Germany Natural gas Konsequenzen eines Importstopps von russischem Erdgas NOTE: this study is based on unrealistic assumptions and therefore can not be taken seriously, see Our analysis
(12.7% reduction of economic output by cross value-chain propagation of effects are claimed)
Bundesnetzagentur[11] 21.06.2022 July 2022 Germany Natural gas Gas-Mengengerüst von 06/22 bis 06/23 No gas shortage in scenarios without Nord Stream 1, but with proportional export reductions and/or 20% savings (since 07/2022) and 16 GW of LNG (since 01/2023).
Small to moderate shortage (19-107 TWh) in other scenarios.

There seems to be an underestimation of the savings impact in scenario 2.2.1, which should be higher if we assume the graphically about 20 GWh/h savings on slide 6.

Deutsche Bundesbank[12] 20.06.2022 July 2022 Germany All Perspektiven der deutschen Wirtschaft für die Jahre 2022 bis 2024 GDP 2023: -3.2 % (vs. 2022) or -6.75% (vs. baseline scenario)
Note: alternative scenario simulates multiple risks from war escalation: energy embargo, supply chain problems etc.
IWH Halle update [13] 20.06.2022 July 2022 Germany Natural gas Deutsche Gasspeicher erreichen jahreszeitüblichen Füllstand. Gas reserves are sufficiently filled so that immediate embargo is manageable. Some shortage expected in case of very cold winter. "Seit [der Vorgängerstudie im April] hat sich die Situation jedoch deutlich verändert. Die Füllstände der deutschen Gasspeicher entsprechen mittlerweile dem für die Jahreszeit üblichen Niveau von etwa 50%, und sie dürften noch weiter steigen. Sollte es im Laufe der kommenden Monate zu einem Lieferstopp für russisches Gas kommen, könnte der Gasbedarf im Winter 2022/2023 wohl vollständig bedient werden zumal höhere Gaspreise die Nachfrage dämpfen wüden. Bei einem sehr harten Winter mit entsprechend hohem Gasverbrauch in den privaten Haushalten könnte es allerdings immer noch zu einem Engpass kommen."
IMK (Krebs) [14] 9.05.2022 May 2022 Germany Natural gas Auswirkungen eines Erdgasembargos auf die Gesamtwirtschaftliche Produktion In Deutschland Basic scenario: GDP -3.2 % to -8.0 % (Mai 2022 - Apr 2023)
Optimistic scenario: GDP -1.2 % to -3.0 % (Mai 2022 - Apr 2023)
IWH Halle [15] 26.04.2022 July 2022 Germany Natural gas Regional effects of recession in Germany due to Russion gas supply interruption The results are nuanced and often (arbitrarily?) misinterpreted by gas embargo opponents.
Hence, we discuss them in detail here.
DIW Berlin
ifo München
IfW Kiel
IWH Halle
RWI Essen [16] 		12.04.2022 July 2022 Germany All From pandemic to the energy crisis – Economy and politics under permanent stress GDP: +1.9% in 2022, -2.2% in 2023
Unemployment: 5.2% in 2022, 6.0% in 2023 in gas embargo scenario, as opposed to non-embargo scenario, which assumes 5.0% for both years (p. 67)
DIW [17] 08.04.2022 April 2022 Germany Natural gas Energy supply in Germany is secured also without natural gas from Russia ~10% gas shortage
Agora Energiewende [18] March/April 2022 April 2022 Germany Natural gas Energy security and climate protection reconciled: The way out of the fossil energy crisis Short-term saving potential between 160 TWh and 260 TWh, which is close to the amount of Russian gas to be replaced (230--290 TWh)
IMK [19] March 2022 April 2022 Germany Natural gas Ukraine war complicates post-pandemic recovery: Economic forecast 2022/2023 GDP 2022: -3.9% (vs. 2021) to -6% (vs. baseline scenario)
(the cost of reducing gas demand by ~15% of imported volumes through higher prices)
Leopoldina [20] 08.03.2022 April 2022 Germany Natural gas How Russian gas can be substituted in German and European energy supply "We come to the conclusion that immediate stop of Russian gas supply would be manageable for German economy. It could come to shortages in the next winter, however it is possible to limit negative effects and alleviate social hardness by implementing the suggested counter-measures."
ECONtribute [21] 07.03.2022 April 2022 Germany All What if...? The economic impact of a Russian energy import ban on Germany GDP: -0,5 % to -3 %
Goldman Sachs [22] 07.03.2022 April 2022 Europe Natural gas The Impact of Gas Shortages on the European Economy (Schnittker) GDP (2022 relative to baseline): EU -2.2 %, Germany -3.4 %, Italy -2.6 %
Allianz Research [23] 03.03.2022 April 2022 Europe Natural gas Can Europe do without Russian gas? +40% electricity price increase and a +100% gas price, which would reduce demand by 8-10% and increase supply from alternative sources by 8-10% in the short-term
Aurora Research [24] 03.03.2022 April 2022 Europe Natural gas Impact of Russia-Ukraine war on European gas markets: can Europe cope without Russian gas? -14% demand reduction with concerted efforts by regulators, industry and consumers
EUR 60-100 billion investment and government intervention to fill the storage
Video presentation
Bruegel [25] 28.02.2022 March 2022 Europe Natural gas Preparing for the first winter without Russian gas If all Russian gas imports were to stop on March 1, 2022: "Europe would need to reduce demand by at minimum 400 TWh (or 10%-15% of annual demand). This is possible. A portfolio of exceptional options could abate at least 800 TWh."

Opinions and statements

Pro-embargo

  • Prof. Veronika Grimm, Wirtschaftsweise: „Es gibt kein Modell, das eine Katastrophe plausibel darlegt“ [26]
  • Prof. Reint Gropp, Präsident des Leibniz-Instituts für Wirtschaftsforschung Halle: "Gleichzeitig ist unstrittig, dass die Ukraine nicht nur sich selbst, sondern das gesamte westliche Wertesystem und unser Modell einer freiheitlichen Gesellschaftsordnung verteidigt. Da scheinen ein paar Prozent weniger Wachstum, gerade auch wenn der Staat bei den niedrigen Einkommen unterstützend eingreift, zu verschmerzen zu sein. Einige Beobachter, insbesondere aus der Industrie, haben aber argumentiert, dass speziell ein Gasembargo [...] im Winter zu frierenden Menschen und dem Abschalten ganzer Industriezweige führen würde. Ich denke, dass man diese Aussagen als von Eigeninteresse getriebene Schreckgespenste abtun kann. Denn es bleibt dabei unklar, warum eine Kombination von Wiederhochfahren der Kohle- und wohl auch Atomkraftwerke in Verbindung mit einem forcierten Ausbau der erneuerbaren Energien sowie Energieeinsparungen (die sich durch die höheren Preise von selbst einstellen würden) und Flüssiggasimporten das Problem nicht lösen sollten. Es bleiben natürlich Risiken, aber ich denke, unsere Freiheit sollte es uns wert sein, jetzt konsequent zu handeln"[27]

Alternatives to embargo

  • Suggestion to offer to Russia buy a certain amount of gas at a fixed price and only if that fails do embargo Ockenfels, A., Zachmann, G. (2022), Gasmangel: Wie Deutschland das Gasspiel Putins drehen kann, retrieved 27 June 2022
  • Suggestions on taxes on energy imports Sturm, J. (2022), The simple economics of a tariff on Russian energy imports, retrieved 16 June 2022

Contra-embargo

See Contra_embargo

Gas Delivery Reports

See: Energy data

References

  1. ↑ https://agsi.gie.eu/
  2. ↑ Jacques Reberol, Diana Fathelbajanova, Arturo de Onis, Kacper Zeromski, Louis Watine (2022), Winter Supply Outlook 2022/23 (PDF)
  3. ↑ Bachmann et al. (2022), "Wie es zu schaffen ist" (PDF), Policy Brief No. 034
  4. ↑ Bundesnetzagentur (2022), Gas-Szenarien von 07/22 bis 06/23 (PDF), retrieved 21 August 2022; FAQ: https://www.bundesnetzagentur.de/DE/Fachthemen/ElektrizitaetundGas/Versorgungssicherheit/aktuelle_gasversorgung/HintergrundFAQ/FAQ_Szenarien.pdf?__blob=publicationFile&v=4
  5. ↑ Ragwitz et al. (2022), Europäische Gasversorgungssicherheit vor dem Hintergrund unterbrochener Versorgung aus Russland (PDF)
  6. ↑ Lan et al. (2022), "The Economic Impacts on Germany of a Potential Russian Gas Shutoff", IMF Working Paper No. 2022/144
  7. ↑ Di Bella et al. (2022), "Natural Gas in Europe: The Potential Impact of Disruptions to Supply", IMF Working Paper No. 2022/145
  8. ↑ Ben McWilliams, Georg Zachmann (2022), European Union demand reduction needs to cope with Russian gas cuts
  9. ↑ Gemeinschaftsdiagnose (2022), Zur Gefahr einer Gaslücke in Deutschland bei einem Wegfall russischer Lieferungen – Sonderauswertung Juni 2022 (PDF)
  10. ↑ vbw (2022), Konsequenzen eines Importstopps von russischem Erdgas, retrieved 28 June 2022
  11. ↑ Bundesnetzagentur (2022), Gas-Mengengerüst von 06/22 bis 06/23, retrieved 28 June 2022; FAQ: https://www.bundesnetzagentur.de/DE/Fachthemen/ElektrizitaetundGas/Versorgungssicherheit/aktuelle_gasversorgung/HintergrundFAQ/FAQ_Gas-Mengengeruest.pdf?__blob=publicationFile&v=2
  12. ↑ https://www.bundesbank.de/resource/blob/892560/ce8d8f455734b70d7c4d5f3fdc548c42/mL/2022-06-prognose-data.pdf
  13. ↑ https://www.iwh-halle.de/fileadmin/user_upload/publications/wirtschaft_im_wandel/wiwa_2022-02.pdf#page=4
  14. ↑ https://www.boeckler.de/fpdf/HBS-008318/p_imk_study_79_2022.pdf
  15. ↑ https://www.iwh-halle.de/fileadmin/user_upload/publications/iwh_policy_notes/iwh-pn_2022-01_de_Gaslieferstopp.pdf
  16. ↑ https://gemeinschaftsdiagnose.de/wp-content/uploads/2022/04/GD_F22_Langfassung_online.pdf
  17. ↑ https://www.diw.de/documents/publikationen/73/diw_01.c.838841.de/diw_aktuell_83.pdf
  18. ↑ https://www.agora-energiewende.de/veroeffentlichungen/energiesicherheit-und-klimaschutz-vereinen/
  19. ↑ https://www.imk-boeckler.de/fpdf/HBS-008284/p_imk_report_174_2022.pdf
  20. ↑ https://www.leopoldina.org/fileadmin/redaktion/Publikationen/Nationale_Empfehlungen/2022_Stellungnahme_Energiesicherheit_V1.1.pdf
  21. ↑ https://www.econtribute.de/RePEc/ajk/ajkpbs/ECONtribute_PB_029_2022.pdf
  22. ↑ https://benjaminmoll.com/wp-content/uploads/2022/03/GS_Russian_Gas.pdf
  23. ↑ https://www.allianz.com/content/dam/onemarketing/azcom/Allianz_com/economic-research/publications/specials/en/2022/march/2022_03_03_EU_without_russian_gas.pdf
  24. ↑ https://nkro22cl16pbxzrpzy39bezk-wpengine.netdna-ssl.com/wp-content/uploads/2022/03/Aurora_Mar22_ImpactRussia_Ukraine_EuropeanGas_InsightsPage-1.pdf
  25. ↑ https://www.bruegel.org/2022/02/preparing-for-the-first-winter-without-russian-gas/
  26. ↑ https://www.capital.de/wirtschaft-politik/wirtschaftsweise-grimm-fuer-gas-emabargo-gegen-russland-31805540.html
  27. ↑ https://www.iwh-halle.de/fileadmin/user_upload/publications/wirtschaft_im_wandel/wiwa_2022-02.pdf
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