The Economic Impact of a Boycott on Russian Fossil Fuels (RaboResearch)

  • European leaders have adopted plans to phase out Russian fossil fuels. Coal is already part of the fifth EU sanction package, and today EC President von der Leyen announced the Commission’s proposal for a ban on imported oil.
  • Europe has virtually no alternatives to substitute for Russian gas in the short term, which makes some member states reluctant to phase out these imports in the short term.
  • The downside of postponing the decision to ban imports of Russian fossil fuels (or adopting an implementation date that lies in the future) is that Europe would continue to financially support Putin’s war against Ukraine.
  • The Russian economy would experience twice as much pain in case of a full-fledged boycott of Russian fossil fuels (GDP contraction of 21 percent) compared to a European sanction package excluding oil and gas (GDP contraction of 11 percent). This boils down to economic losses in absolute terms (against our baseline scenario) over two years ranging between USD 750 billion and USD 1300 billion.
  • A full-fledged ban, however, would also push the eurozone economy into a deep recession. The euro area would experience a cumulative contraction of 2.6 percent in GDP over four quarters.
  • A scenario where the EU only targets Russian oil imports would also result in a European recession, albeit with a much smaller impact (1.4 percent cumulative contraction over three quarters) compared to a full-fledged ban. READ MORE PDF LINK

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