The EU energy market is facing shock and deep recession
Bloomberg columnist Rachel Morrison pointed out in an article that if the Russian Federation suddenly cuts off gas supplies to Europe and supplies shortages persist for several months, stagnation and deep inflation could begin in the economies of the countries in the region.
As Morrison writes, because of raw material problems, European energy markets are now in a state that “wouldn’t take much effort to shock them.”
Shiha Chaturvedi, an analyst at JPMorgan Chase & Co, says the same. He pointed out that the energy market in Europe is now “fragile” and that a radical decision by the Russian authorities could cause serious damage to it and leave the region without raw materials for its economies.
To avoid potential problems, European countries may need to take a middle step to avoid EU sanctions and settle disputes over gas payments with the Kremlin.
In the event of a supply cut, advisory firm Wood Mackenzie said industrial demand in Europe would fall by 10%. Edward Gardner of Capital Economics explained that gas prices in this case could rise sharply and increase inflation.
In the coming days, a discussion will take place on the countries of the European Union, during which clashes are expected between the positions of the countries less dependent on gas supplies from the Russian Federation and those who may suffer the most from Moscow’s hypothetical decision.
