BAKU, Azerbaijan, July 28. Russia generates 1.5 percent of GDP per year in tax revenues on gas production and exports, around a quarter of which would be lost; this is large, but clearly Russia can afford to cut off gas, Trend reports with reference to UK-based Capital Economics research and consulting company.
Russia has taken several steps to reduce the supply of gas to Europe in recent months. The latest data from Refinitiv show that total gas flows to Europe were 80 percent lower last week than they were at the start of 2021.
“For Russia, there is some self-inflicted pain. Russia doesn’t have much spare gas storage, so if it keeps flows to the EU low for a prolonged period gas production will fall. As 70 percent of gas produced in Russia is consumed domestically and 30 percent of exports go to non-EU countries, gas production may be 20 percent lower in the event that all EU exports are cut. This would reduce industrial production by 1 percent and GDP by 0.3 percent,” Capital Economics said in its latest report.
The company analysts believe that on top of this, there will also be a hit to balance sheets.
“We estimate that Russian gas exports to the EU amounted to $40-50bn in the first half of this year, more than twice as large as in the same period a year ago. The effect of surging prices has dominated the impact of falling volumes on export revenues and we think this will remain the case until 2023. A cut-off of all EU supplies for the next twelve months would amount to lost revenue of $60bn, or 3 percent of GDP, which compares to Russia’s current account surplus of 15 percent of GDP,” reads the report.
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