G-7 nations face threat of Russia shutting down more gas

The Group of 7 nations must brace for a whole shutdown of Russian gas pipelines within the close to time period, and it might have extreme penalties for Europe's financial system, one analyst warned.

"The G-7 have to prepare for a shutdown of gas. The G-7 can deal with a cutback on oil. There are other supplies that could be gotten around the world, but the gas could be shut off and that would have consequences," mentioned Jeffrey Schott, a senior fellow on the Peterson Institute for International Economics, informed CNBC on Monday.

"Russia already has cut back substantially on gas flowing to Germany and through Ukraine, so shutting down the pipelines is not inconceivable. Russia also sells some LNG to Europe but not that much," he mentioned in an electronic mail after the interview.

"The total cut-off of Russian supplies would prompt gas rationing at least for the short term," he mentioned. "Russian supplies would be partially offset by increased LNG imports, increased supplies from Norway and Algeria, fuel-switching to coal, and conservation measures."

Gazprom, Russia's state-backed vitality provider, has decreased its gas flows to Europe by about 60% over the previous few weeks. The transfer prompted Germany, Italy, Austria and the Netherlands to all point out they might flip again to coal as soon as once more.

G-7 has to arrange for a gas shutdown as vitality disaster continues: Think tankStreet Signs Asia

His feedback got here because the leaders of the G-7 wealthiest nations met in Munich, Germany, for his or her newest summit. 

As international stress continues to pile on Russia over its assault on Ukraine, Europe is going through "a very tight situation," Schott informed CNBC's "Street Signs Asia" on Monday.

"They're playing for time. The more there is a hostility against Russia, the more Putin threatens and perhaps acts to cut off more gas to Europe. I see that coming sooner rather than later," he added.

Growing issues in Europe

European leaders have been rising more and more involved in regards to the risk of a complete shutdown of gas provides from Russia.

Germany declared lately it’s shifting to the so-called "alert level" of its emergency gas plan, as decreased Russian flows exacerbate fears of a winter provide scarcity.

On Thursday, Economy Minister Robert Habeck introduced that Germany would transfer to stage two of its three-stage plan — a sign that Europe's largest financial system now sees a excessive danger of long-term gas provide shortages.

The EU receives roughly 40% of its gas by way of Russian pipelines and is making an attempt to quickly cut back its reliance on Russian hydrocarbons in response to the Kremlin's months-long onslaught in Ukraine.

The motion taken to cease shopping for Russian gold is one small step in the precise route.Jeffrey SchottPeterson Institute for International Economics

Germany, which is extremely depending on Russian gas, had beforehand sought to take care of strong vitality ties with Moscow.

"The threat is that there would be a cut-off of gas before the European gas reserves are filled and that would be a threat to European growth and would cause rationing. So Putin is putting his cards on the table and whether he follows through with the threat, it remains to be seen," Schott mentioned.

Banning Russian gold

In a transfer to disclaim the Kremlin income it must fund the battle in opposition to Ukraine, the G-7 leaders are anticipated to announce additional punitive sanctions in opposition to Moscow in the course of the summit by imposing a ban on Russian gold imports.

"The action taken to stop buying Russian gold is one small step in the right direction," Schott famous, including it might assist starve the Russian financial system of the issues that might be bought overseas.

The restrictions on Russian exports of gold is price about $15 billion a 12 months to Moscow, Creon Butler, director of financial system and finance program at Chatham House, informed CNBC on Monday.

"That's potentially quite significant," he mentioned, however highlighted that's not one thing that can essentially get a buy-in from all of the nations within the G-7. 

"That illustrates the problem. There are a number of concrete things they can do, but whether they can pull off a unified G-7 approach — let alone bringing in other countries, I think this is going to be a challenge," Butler added.

— CNBC's Matt Clinch and Sam Meredith contributed to this report.

primarily based on website supplies www.cnbc.com

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