Europeans Urged To Prepare As EU Agrees To 'Phase Out' Russian Oil

Europeans Urged to Prepare for New Inflation, Price Shocks as EU Agrees to ‘Phase Out’ Russian Oil

SPUTNIK NEWS

Regional business leaders have spent months warning about the potentially disastrous consequences of trying to reduce reliance on cheap and abundant Russian oil, gas and coal supplies, with BASF’s CEO warning in April that such measures could spark “the worst crisis…since the end of World War II” for Germany – Europe’s main industrial powerhouse.

The European Union’s approval of a sixth package of sanctions against Russia, including the phase-out of Russian crude oil and petroleum products, has sparked a fierce debate between politicians, business leaders, economists and market experts about what’s more likely: the draining of Moscow’s “war chest” or Europe plunging into a recession complete with new energy price shocks and more inflation.

Europeans should expect “the worst possible scenario” from the new restrictions, Guntram Wolff, director of Bruegel, a Brussels-based economics think tank, told Spiegel. The economist predicts that businesses and consumers alike will feel the pinch of higher energy prices.

Wolff expects Brussels’ latest measures to lead to a “considerable loss of purchasing power,” forcing politicians to act via fuel rebates, tax cuts or income support, in turn driving up national debt levels.

Industry leaders in Germany, the European industrial powerhouse which relied on Russia for nearly 40 percent of its oil needs, 55 percent of its gas and 53 percent of its coal for steelmaking and power generation in 2021, have expressed serious concerns about the economic impact of attempts to sever these ties.

Last month, Federal Network Agency chairman Klaus Muller warned Germans of possible gas shortages, while Economy Minister Robert Habeck said he could not rule out a deficit of gasoline supplies. In April, the Julich Research Center, a German state-sponsored interdisciplinary institution, warned that cutting down Russian gas deliveries by two thirds (as recommended by Brussels) would force industrial enterprises to shut down for months on end to fill up the country’s gas storage sites, since there are simply no available alternative sources of supply. 

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