Give up Russian gas? “Manageable costs for the French economy”

L’EXPRESS: Can the incursions by the Russian army in Ukraine rekindle the debate about an embargo on the purchase of hydrocarbons in Moscow?

Philip Martin. Strictly speaking, if we did this study, it was to put the issue on the table, argue with numbers and leave the choice to the politicians. The Economic Analysis Council makes no recommendations. We just want to show that the economic costs of a Russian gas embargo exist, but the impact is manageable. The sanctions imposed so far have certainly impacted Russia’s growth and will undoubtedly trigger a recession in the country. But we’re not talking about an economic collapse like the country experienced in 1991 and 1998, with all the political consequences you can imagine. When we talk about tougher sanctions, we need to quantify the impact of the possible scenarios. I repeat: a total embargo on our purchases would have real repercussions which, although very heterogeneous depending on the European country, can certainly be absorbed by our economies with accompanying measures.

Let’s start with France, so say the impact would end up being pretty small

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Absolutely. We estimate that the negative impact on national income could range from 0.15% to 0.3%. A number that accounts for all cascading effects. We are therefore very far from the economic catastrophe that the Covid and the successive restrictions may have represented. We can therefore rule out a scenario of a GDP slump of more than 1% in France with a very high degree of certainty.

What assumptions do you make to arrive at this number?

What are we talking about exactly? Gas accounts for 15% of the primary energy consumed in France and oil for 29%. In the case of gas in particular, Russian supplies account for 20% of natural gas consumption in France. Experts from the International Energy Agency assume that only 10-15% of Russian-European gas imports are substitutable. Our realistic assumptions are that this could miss about 15% of our gas needs or 3% of our total energy needs. Given the weight of energy in the economy and our ability to resort to other sources, the impact on growth would end up being just 0.14%. Even in an extreme scenario where we couldn’t find a replacement, a Russian gas embargo would only hurt growth by 0.3%. It is not negligible, but the country would not fall into a recession.

These are global numbers, but would some households or sectors be badly affected?

Of course we have to talk about support measures. For the sectors most affected, and I am thinking of the chemical industry, partial unemployment measures should allow these companies to weather the economic shock and give them time to adjust their means of production without destroying jobs. More purchasing power support measures will be needed for the most modest households as gas prices could double.

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What could the public finance bill be?

We didn’t estimate it exactly, but it could reach 4 billion euros at most. Nothing to do with what the state spent on the covid. Of course, not all European economies are affected in the same way, but we need a sensible debate on this issue because social and political pressures will increase.



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