Industry fears halving of its gas supply, major loss in output if Russia stops deliveries to Germany

A sudden stop of Russian gas supplies as of July 2022 would lead to a loss of economic output of more than 12 percent, affecting up 5.6 million jobs in the country, a paper commissioned by the Bavarian Industry Association (vbw) states. The paper, prepared by consultancy Prognos, assumes that not even half of the industry's gas demand would be covered due to legally defined minimum quantities in gas storage facilities and the supply of priority customers. Planned liquefied natural gas (LNG) deliveries are expected to not be available in sufficient quantities yet and the paper examines different production processes as well as their upstream and downstream industries, coming to the conclusion that sectors such as the glass industry or steel processing are particularly affected. In these sectors, the value added could fall by almost 50 percent, the vbw said. The value added of all directly affected sectors would fall by 3.2 percent.

Across Europe the question of dealing with the consequences of diminishing Russian gas supplies, and the alternatives are heatedly debated. Since the beginning of the Russian war against Ukraine and the looming gas shortage in the coming winter, German companies and industry associations have said repeatedly that in particular the steel, chemicals and ceramics industries will suffer exceedingly if not supplied with a constant flow of gas, leading to the loss of jobs and possibly the exit of entire industries. Other economists have argued that an embargo of Russian gas would be possible, showing in their macroeconomic models that the overall would lead to a decline in German GDP less severe than during the Covid19 pandemic.