Barclays warns of sub-parity euro, 5 ppt GDP hit if Russia turns off gas taps

By Marc Jones

LONDON – Analysts at Barclays have warned of a 5 share level hit to euro zone GDP and a dive under greenback parity for the euro if Russia closes its fuel faucets as a part of the escalating conflict in Ukraine.

Worries are mounting in Europe that Moscow may sharply cut back the quantity of fuel it provides and even cease it altogether as tensions rise and sanctions intensify over its assault on Ukraine.

The Kremlin has already reduce off provides to Bulgaria and Poland and this week sanctioned Gazprom’s European subsidiaries together with Gazprom Germania, prompting Germany’s Economic system Minister Robert Habeck to warn of no extra fuel from Russia.

“If Russia closes its fuel faucets (to Europe), we anticipate EURUSD to fall under parity,” Barclays stated in a be aware on the rising tensions.

The euro is now at $1.03, having slumped round 8% within the final three months.

“Our economists estimate that a whole lack of Russian provides, mixed with rationing of the rest, may dent euro space GDP by greater than 5 share factors over one 12 months”.

Strain is now on Europe to safe various fuel provides effectively earlier than the winter sees temperatures drop once more.

The EU is at the moment grappling with Russia’s demand that nations begin paying for his or her fuel in roubles quite than euros or dollars as they historically have.

Bowing to such a requirement may imply nations successfully breach their very own sanctions introduced towards Russia as a part of a co-ordinated transfer by the West to punish Moscow for its “particular army operation” in Ukraine.

A latest report by credit score rankings big Moody’s warned that a halt to the vitality commerce between Russia and Europe would result in recessions around the globe

About 25% of the almost 4,000 non-financial firms Moody’s analyses globally would “face important stress” it stated, though it could be a considerably larger 40% within the Europe Center East and Africa (EMEA) area.

It “will trigger important stress around the globe” Moody’s stated.

Graphic: Europe’s pure fuel imports from Russia: https://fingfx.thomsonreuters.com/gfx/mkt/zdvxogjmepx/Pastedpercent20imagepercent201651650909918.png