The European Union is potentially gearing up for an economic recession, as the Russian-state gas giant Gazprom could not resume the gas flows in the Nord Stream 1 pipeline. Nord Stream 1 has been in maintenance since July 11 and is due to resume gas flows on July 21. However, several European officials have raised concerns Vladimir Putin could decide not to reopen the pipeline on the deadline as part of the energy war Russia is waging against Europe.
CNBC Correspondent Silvia Amaro reports that possibility would plunge the European Union into recession.
Speaking to CNBC viewers, she said: “What I think is perhaps the most dominant theme right now for European markets – both in equities and in euro – and that is what happens with Nord Stream 1 over the maintenance period and whether or not those flows are going to resume.”
As a reminder to viewers, Ms Amaro said: “We know that already the flows that are going through Nord Stream 1 are 60 percent lower than they were pre-war. So, we’re sitting at around 40 percent.
“Very interesting note from Golden Sachs, a couple of weeks ago. They were saying that if those flows were to drop completely to zero, in that situation they estimate the eurozone’s contraction of up 1.7 percentage point.”
“So that would really, therefore, dip the Eurozone into recession with the hardest hit economies being Italy and Germany,” Ms Amaro said.
Italy and Germany, two heavy consumers of Russian gas, have scrambled to find alternative sources of energy and gas to face the potential threat of a complete gas cut-off on July 21.
The two countries and France have vowed to end their support for overseas fossil fuel projects though they admitted their countries would need gas in the short-term.
Speaking to reporters at the G7 summit, German Chancellor Olaf Scholz said that the “future does not lie in gas” but that in the short-term, gas is going to be necessary and that investments in it in the transitional phase “are going to have to be supported.”