Page 31 - RusRPTAug22

● Restructuring of gas infrastructure and diversification of supplies. The latter can be done through the growth of LNG imports, but the capacity on the world market until 2025 is limited, and the redirection of supplies to Europe will inevitably lead to higher prices. The redistribution of LNG within Europe will require additional pipelines and capacities. Currently, 40% of LNG in Europe is taken by Spain and Portugal, which have little connection with the rest of the continent. Belgium and Germany are already working on increasing capacity. The IEA believes that it is especially important to provide access to LNG to the countries of Central and Eastern Europe that are most dependent on Russian supplies. This will allow redirecting about 15 billion cubic meters. m of Russian LNG from Europe compared to the baseline scenario.
● Accelerating the transition to a low-carbon economy. In particular, we are talking about the accelerated introduction of biomethane as an energy source, which can provide another 4-8 billion cubic meters. m of savings per year.
● But the main resource for reducing dependence on Russian gas is a decrease in demand, the IEA notes. Accelerating the deployment of renewable energy sources will reduce gas consumption for electricity generation by 10% by 2025. Changing behavioral habits (in particular, lowering the temperature in rooms by 1°C) will save about 10 billion cubic meters. m per year. Increasing energy efficiency and replacing gas water heaters with heat pumps by another 10 billion cubic meters. But the cost of such an operation is €15,000-20,000 per household, Sergey Vakulenko notes.
How will this affect the European economy?
The decrease in the load of Nord Stream 1 has already led Goldman Sachs to lower its forecasts for the growth of the European economy: from 0.2% to 0.1% in the third quarter of 2022 and from 0.3% to 0% in the fourth. In 2023, while maintaining the current level of pumping, growth rates will fall from 1.9% to 1.1%.
The probability of a recession in the euro area in the next year in the investment bank is now estimated at 50% (for comparison, in the US - only 30%). ING believes that Europe will go into recession by the end of 2023, regardless of whether there is a complete shutdown of Russian gas. In Germany, the PMI index fell below 50 for the first time in 25 months, indicating that economic activity is expected to contract.
A complete shutdown of gas supplies from Russia could lead to the fact that Germany and Italy, and with them the eurozone, will find themselves in recession this year. The decline in real GDP in Europe in this scenario is estimated at 1.2-2.7% until the end of the first quarter of 2023, Germany - 1.7-3.2% and Italy - 2.6-4.1%. According to the IMF, Germany in the next three years may lose a total of 4.8% of GDP.
The shortage of gas will accelerate the already rising inflation. This could hurt consumer confidence. After Nord Stream 1 pumping was
31 RUSSIA Country Report October 2020 www.intellinews.com