Recently, the US bank JP Morgan issued a warning of ominous consequences: If Russia were to completely stop oil exports to Europe, the impact on the world economy could be so great that it would instantly send the price of oil soaring to $400 per barrel.
With a global economy still dependent on oil, the impact would be far worse than it was in the 1970s. It would plunge us into a recession with consequences never seen before.
Since the outbreak of the war against Ukraine, what Russia has done is reduce gas shipments to Europe. Russia has already cut gas supplies to six countries and reduced it to as many others. Although Russia is exporting fewer energy products, it is actually making more money because prices have skyrocketed.
Last week, the European Union (EU) showed a united front in the face of Putin’s “blackmail”. The plan aims to reduce gas demand by 15 percent. The outlook is difficult, not only the measures – such as economic sanctions – have stimulated inflation to levels not recorded in four decades and affected the pace of economic growth, but some recommendations to the population include “wash only four parts of the body” and “do not use heaters or air conditioners” and even “take off your tie” to save energy European households are increasingly facing rising food prices, thus increasing the social cost of the conflict.
As a strategy, to reduce its dependence on Russian gas, the EU has also resorted to buying liquefied natural gas that comes in ships from the United States. Plans to build natural gas terminals are also accelerating. However, the measures have not been enough to reduce economic pressure. Inflation in Europe hit another record high in July, rising from 8.6% to 8.9%, according to the European statistics agency, Eurostat.
With the world’s processing plants running at full capacity and no more alternative gas sources available: Will Putin’s gamble pay off?
The scenario described has been little explored, because it would apparently be suicidal for Putin to cut off his own source of income in the middle of a trade war. However, some sources suggest that the Russian government has already accumulated enough “cash” to survive in case its leader decides to unleash the Apocalypse. Besides, Putin’s time is running out. For next year, Germany (one of the main importers of its gas) plans to completely stop depending on Russia for that energy.
The environmental think tank Center for Research on Energy and Clean Air (CREA) has recommended in a recent study to “create a plan to replace Russian fossil fuels with clean (non-fossil) energy as soon as possible, in conjunction with efficiency and energy saving”.
There is no doubt that the above would be much more sustainable than, as has been the case up to now, trying to reorganize the global flows of fossil fuels. Surely it would have much greater economic benefit, and long-term national security.
Anticipating this ominous scenario that a cornered Putin might resort to, European governments should immediately declare a state of emergency. This aimed at implementing measures for the construction of wind and solar farms as an absolute priority, avoiding all kinds of bureaucratic procedures. More subsidies could also be offered for the purchase of electric vehicles, thus reducing their dependence on foreign oil for public and private transport.
The European Union needs to recognize and prepare for the danger of a visceral decision by Putin, through its most powerful weapons yet: its oil and gas exports. If the aforementioned scenario materializes without having declared a state of emergency, millions of people will pay dearly for the passivity of their governments.
