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Alas, reports of massacres of civilians in Bha, near Kyiv, are not surprising. as a response. Emmanuel Macron Arguing that “what happened in Boucha requires a new round of sanctions and very clear measures, so we will coordinate with our European partners, especially with Germany.” He added, “In oil and coal, we have Must be able to move forward. Of course we should move forward with sanctions . . . we cannot accept that.” But sanctions on Russian oil and coal are not enough. It is also necessary to ban the import of Russian gas.
according to U.S. Energy Information AdministrationIn 2021, 74% of Russia’s natural gas exports will go to European member countries of the OECD. This is equivalent to 5% of Russia’s export earnings. The difference between these exports and oil and coal exports is that Russia is more easily relocated than natural gas, whose transportation relies on inflexible infrastructure.
So adding natural gas to the list of embargoed products would add to Russia’s pain. The argument against this idea is that some European countries are particularly dependent on Russian gas, so the cost of slashing imports would be huge for them.
The most vulnerable countries are Germany and Italy. For example, Germany relies on Russia for a third of its energy consumption. In addition, Germany received 58% of its natural gas from Russia in 2020, while Italy received 40%. These countries also rely heavily on natural gas: Germany consumes more than twice as much as France, which has a large nuclear power capacity. An embargo on gas supplies would appear to destroy the economies of Germany and similarly fragile states.
However, recent economic research has shown that this fear is – understandably – exaggerated.A sort of Paper Economists (in alphabetical order) led by Rüdiger Bachmann of the University of Notre Dame on Germany pointed out that the focus should really be on natural gas, since oil and coal are supplied in global markets. If necessary, as the document notes, “sufficient world market capacity exists in other oil and coal exporters to cover shortfalls.” Russia could also divert its exports elsewhere, although it may have to do so at a discount .
So what about sanctions on natural gas? In the short term, the loss of Russian gas cannot be made up for by imports from elsewhere. The paper assumes that the result of an energy embargo on Russia will be a 30% reduction in gas deliveries, which accounts for about 8% of Germany’s total energy consumption. The focus of the analysis is that the fungibility of natural gas in consumption and production is lower in the short term than in the long term, and higher in some uses than others. With a very low short-run elasticity of substitution (pessimistic assumptions), an 8% drop in oil, gas and coal consumption would lead to a 1.4% drop in GDP – a cost of 500 to 700 euros per German citizen per year. With a 30% drop in gas use, the economic damage would rise to 2.2% of GDP (2.3% of gross national expenditure) or €1,000 per citizen per year. If a possible second-round macroeconomic impact is taken into account, the impact could reach 3% of GDP.
Alternative estimates exist. A survey by Clemens Fuest Estimates for the decline in GDP vary between 0.2% and 6%, according to a report by the ifo institute in Munich at the Ambrosetti Economic and Financial Forum over the weekend. As he put it, “we really don’t know”. But we do know that if an embargo is necessary, it is best to act now: as the paper cited above explains, the rationale “is the seasonality of gas demand. During the summer months, disruptions to Russian gas can Substitute with Norway and other sources, thereby maintaining industrial supply.” Such an early move would also “trigger substitution and reallocation dynamics that are critical to reducing economic costs.”
Above all, a total embargo on Russian energy imports into Europe would be a statement of collective will to defend the values ??of postwar Europe against its fiercest foes. Leadership is Germany’s responsibility. Yes, it will carry a huge cost.But the reason it’s so fragile is economists after all Hans Werner Sinn Rightly calling it “Germany’s energy fiasco,” shutting down nuclear power and becoming overly dependent on Russia. Moreover, even under a worst-case scenario, these costs would be modest compared to those hit by the eurozone crisis.
Of course, Germany and other fragile states must be helped. Available gas should be considered a European resource whenever feasible. If the UK were to join, it would be a grand gesture. Fiscal policy is also needed to cushion the blow on vulnerable groups. Beyond that, an infrastructure must be built that provides maximum flexibility.
The long-term goal should be to allow Europe to import from anywhere, while Russia remains dependent on the European market. The short-term goal should be to make Putin’s life as difficult as possible.A better option is Harvard’s suggestion Ricardo Hausman Most buyers around the world impose criminal taxes on Russian imports. Alas, this is not going to happen.
it may be Putin demands payment in rubles In any case, the supply will eventually be cut off. But this shouldn’t be necessary. Right or wrong, NATO decides not to defend Ukraine militarily. The least Europeans can do is use all the other tools at their disposal. They must bear and share the cost of cutting off Russia’s energy imports. They must develop energy policies that maximize flexibility and resiliency. It’s time to act.
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