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  4. Germany refusing Russian energy to lead to inflation increase by 2.3%
Europe

Germany refusing Russian energy to lead to inflation increase by 2.3%

  • By Al Mayadeen Net
  • Source: Agencies
  • 29 Mar 2022 22:22

If Germany bans the import of Russian energy supplies, the country could be looking at extensive economic consequences, such as higher inflation and a shrunk GDP.

  • Germany faces a dilemma when it comes to what decision to take on Russia
    Germany faces a dilemma when it comes to what decision to take on Russia

Germany refusing to import energy from Russia could lead to the country's GDP decreasing by 3% in the medium term and increase its inflation by 2.3%, the German Institute for Economic Research (DIW) in Berlin said.

The calculations showed that if the German economy regularly adjusted to no longer rely on Russia for oil and gas, the corresponding restructuring would require up to a decade. The repercussions will also reflect on the volume of economic production in the country, as it will decrease by 3% within 18 months, data showed.

"The refusal to import [energy resources from Russia] will lead to an increase in inflation by 2.3 percentage points," the document read.

Researchers noted that cutting off Russian gas, oil, and coal would also have far-reaching consequences.

"Even if Russia continues to be able to sell some of its energy carriers to third countries such as China, it can be assumed that this will only be possible with a significant reduction in prices," DIW concluded.

German government spokesperson Steffen Hebestreit said the Cabinet currently was not backing introducing a ban on Russian energy supplies, since their immediate termination would inflict serious damage on the country.

Hebestreit said Chancellor Olaf Scholz  presented the reasons for this decision, and the former pointed out that it "primarily concerns the supply in Germany."

A representative of the German Cabinet said Berlin believed that such an embargo would have "significant economic consequences," including a sizeable spike in unemployment.

The sanctions Germany is considering imposing on Russia are over its special military operation in Ukraine, launched due to NATO's eastward expansion, Kiev's shelling of Donbass, and the killing of the people of the Donetsk People's Republic and Lugansk People's Republic, in addition to Moscow wanting to "denazify" and demilitarize Ukraine.

The US and its allies have rolled out comprehensive sanctions, including restrictions on the Russian central bank, export control measures, SWIFT cutoff for select banks, and closure of airspace to all Russian flights. Many of their companies have suspended their Russian operations.

The status-quo and the sanctions on Russia have weakened Western citizens' purchasing power, causing fuel prices to soar in the country with US oil prices reaching their all-time high following a ban on Russian fuel exports.

Berlin fears following the US decision and ending up on the same path toward surging gas prices and a lower purchasing power for its citizens.

  • United States
  • Nato
  • Ukraine crisis
  • Olaf Scholz
  • Russia
  • Russian special military operation
  • Germany
  • Donbass
  • Gas prices
  • Ukraine
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