![]() On aggregate, Europe could avoid shortages if Russian deliveries continue at the current reduced levels or in the event of a temporary but full disruption through the summer. Demand compression in response to high energy prices will help reduce supply gaps. ![]() Moreover, transmission constraints limit the ability to transport gas from alternative sources across some regional distribution systems and even within some countries, leaving several countries in Central and Eastern Europe, including Germany, and Italy, which are heavily reliant on Russian gas, particularly vulnerable. Nevertheless, there is uncertainty about global supply, and countries’ and firms’ ability to switch between energy sources. ![]() Alternative gas and power sources- including higher non-Russian pipeline gas imports, an increase in LNG imports and fuel energy switching in power generation-could likely replace some two-thirds of Russian gas over the next 12 months. ![]() However, with the recent reductions in deliveries the situation has escalated further. So far, Europe has been able to offset reductions in Russian deliveries and build up storage to reach average historical levels in June. As of early July, Russian gas has ceased or been significantly reduced to a growing list of countries, beginning with Poland and now including the Netherlands, Germany, Austria and Italy, among others.įully replacing Russian gas imports may prove difficult in the short-term. Russian pipeline flows to Europe have been dropping since the second half of 2021 and following recent cuts in deliveries, Russian exports to the EU are now down roughly 60 percent compared to June 2021. Russia has been Europe’s largest supplier of natural gas and distribution networks are geared towards Russian supply. Russia’s invasion of Ukraine has placed natural gas supply in Europe at risk. National responses and RePowerEU contains many important measures to help address these challenges, but immediate coordinated action is called for, with specific opportunities in each of these areas. Immediate policy priorities center on actions to mitigate impacts, including to eliminate constraints to a more integrated gas market via easing infrastructure bottlenecks, to accelerate efforts in defining and agreeing solidarity contributions, and to promote stronger pricing pass through and other measures to generate greater energy savings. Many other countries are unlikely to face such constraints and the impact on GDP would be moderate-possibly under 1 percent. The effects on Austria, Germany and Italy would also be significant, but would depend on the exact nature of remaining bottlenecks at the time of the shutoff and consequently the ability of the market to adjust. ![]() Our findings suggest that in the short term, the most vulnerable countries in Central and Eastern Europe - Hungary, Slovak Republic and Czechia - face a risk of shortages of as much as 40 percent of gas consumption and of gross domestic product shrinking by up to 6 percent. With natural gas an important input in production, the capacity of the economy would shrink. However, a longer full shut-off of Russian gas to the whole of Europe would likely interact with infrastructure bottlenecks to produce very high prices and significant shortages in some countries, with parts of Central and Eastern Europe most vulnerable. Alternative sources could replace up to 70 percent of Russian gas, allowing Europe to avoid shortages during a temporary disruption of around 6 months. This paper analyzes the implications of disruptions in Russian gas for Europe’s balances and economic output. ![]()
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