Goldman Sachs analysts have said Russia could significantly reduce its natural gas supplies to Europe in response to the EU’s oil import ban, worsening the slowdown on the continent.
The EU agreed on a plan on Tuesday to ban most Russian oil imports, with officials expecting a 90% cut in supply by the end of the year.
Later on Tuesday, Russia’s Gazprom announced that it had cut off natural gas supplies to Dutch company GasTerra and would stop deliveries to two other companies for its contracts with Germany. Gazprom said it was doing so because the companies failed to meet ruble payment requirements.
Goldman analysts, led by Alain Durre and Filippo Taddei, said in a note on Tuesday that the odds of further natural gas cuts have increased as Russia seeks to retaliate against the oil embargo.
“There is an increased risk that Russia will respond to the oil ban by disrupting its natural gas supply, which could cause a material deterioration in the European economic outlook,” the analysts wrote.
Tighter supplies could further derail Europe’s economy, which many analysts expect to slow sharply in the coming year due to high inflation and fallout from Russia’s invasion of Ukraine. .
“Risks to economic growth in the eurozone in particular are tilted to the downside,” Goldman said.
“In this regard, a sudden stop in imports of energy products from Russia, combined with a likely drop in confidence, would most likely push Germany and Italy into recession and reduce economic growth in the euro area by more two percentage points.”
The EU used natural gas for 24% of its energy mix in 2020, according to Eurostat. That year, 43% of the bloc’s natural gas imports came from Russia.
