Economy

Do without Russian gas? “A manageable cost for the French economy”

Do without Russian gas?  “A manageable cost for the French economy”
Written by on100dayloans

L’EXPRESS: Can the abuses of the Russian army in Ukraine rebound the debate on an embargo on the purchase of hydrocarbons in Moscow?

Philip Martin. Precisely, if we did this study, it is to put the subject on the table, argue with figures and leave the choice to politicians. The Economic Analysis Council makes no recommendations. We just want to show that the economic cost of a Russian gas embargo exists but the impact is manageable. The sanctions taken so far have certainly had an impact on Russian growth and will undoubtedly generate a recession in the country. But we are not talking here about a collapse of the economic system as the country experienced in 1991 and 1998 with the political consequences that one can imagine. If we are talking about tougher sanctions, we have to quantify the impact of the possible scenarios. I repeat: a total embargo on our purchases would have a real effect that is admittedly very heterogeneous depending on the European countries, but quite absorbable by our economies with accompanying measures.

Let’s start with France, so you say that the impact would be quite low in the end

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Absolutely. We estimate that the negative impact on national income could be in the range of 0.15% to 0.3%. A figure that takes into account all the cascading effects. We are therefore very far from the economic cataclysm that the Covid and the successive confinements may have represented. We can therefore rule out with a very high degree of confidence a scenario of a GDP collapse of more than 1% in France.

What assumptions are you making to arrive at this figure?

What are we talking about exactly? Gas represents 15% of the primary energy consumed in France, oil 29%. On gas in particular, Russian deliveries account for 20% of natural gas consumption in France. International Energy Agency experts assume that only 10-15% of Russian European gas imports can be substituted. Our realistic assumptions assume that around 15% of our gas needs could therefore be missing, or 3% of our total energy needs. Given the weight of energy in the economy, and our ability to turn to other sources, the impact at the end on growth would be only 0.14%. Even in an extreme scenario where we would not be able to find substitutes, a Russian gas embargo would only cut growth by 0.3%. It is not negligible, but the country would not fall into recession.

These are global figures, but some households or sectors would however be very impacted?

Obviously, we have to talk about support measures. For the sectors most affected and I am thinking of the chemical industry, partial unemployment measures should allow these companies to weather the shock of activity and give them time to adapt their production tool without destroying use. For the most modest households, it will be necessary to go further in support measures for purchasing power because gas prices could double.

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What could be the bill for public finances?

We have not estimated it precisely but at most, it could reach 4 billion euros. Nothing to do with what the state spent on the Covid. Obviously, not all European economies are affected in the same way, but we need a reasoned debate on the subject because the social and political pressure will increase.


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