EU ban on gas imports from Russia will cause serious problems in the European economy

The Fitch rating agency said that the introduction of a ban on Russian gas imports to the EU would cause a significant disruption to the economy and affect all industries in Europe. The region will suffer from gas shortages and high prices amid limited capacity for alternative sources of gas supply and transportation.

The spike in gas prices after the ban will also have a chain reaction for electricity, coal and oil. The industry will bear the brunt of the supply shortage, as demand from the population will be a priority. A prolonged ban on Russian gas is unlikely, but a depressing scenario. The temporary interruption of gas supplies through Ukraine is the most likely scenario for which Europe is better prepared due to high reserves and the recent opening of a new gas pipeline from Russia to Germany.

In the event of a protracted ban imposed by Europe or Russia, the steel and chemical industries will be hardest hit. This will accelerate the closure or conservation of capacities, which are already suffering from competition from the energy-cheaper industries in the United States or in the Middle East.

In 2013, Russia supplied $ 145bn. cubic meters of gas to Europe, an alternative to which will be difficult to find. Increases in European gas production and gas supplies from North Africa can only offset a fraction of this. In addition, production in Europe is mainly tied to long-term contracts for the supply of gas. Consequently, prices for gas and other energy resources will rise.

European gas networks suffer from limited ability to transport gas across borders. Japan was able to reduce electricity demand by 4.7 percent after the Fukushima disaster, but reducing this level will be much more difficult for 28 countries with their own plans.