Putin’s gas bluff tearing £250billion blackhole in Russia’s economy: ‘Really in trouble’

Putin 'much weaker than we think' says John Sweeney

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Russia is continuing to tighten the screw on Europe’s gas flows as exports dwindle. Gas giant Gazprom is sending gas to Germany at just 20 percent of Nord Stream’s capacity — the gas pipeline that connects Russia to Germany — and many other European countries are now preparing for crises of their own. Not only are experts fearful that Europe can be plunged into a crippling recession but many warn that European countries will have to ration their gas usage to survive the winter.

Other experts, however, think Russia and its president Vladimir Putin have more to lose if they turn off the taps.

Yale University economists Jeffrey Sonnenfeld, Steven Tian and Michal Wyrebkowski tell Express.co.uk that Russia’s funding for its invasion of Ukraine will take a huge blow if Europe is no longer importing Russian gas.

They recently wrote a study claiming that Russia will face “economic oblivion” under Western sanctions, also stressing that Russia is more reliant on Europe for gas exports than Europe is for Russian gas imports.

Speaking to Express.co.uk, they explained how Europe no longer buying Russian gas will directly impact Putin’s invasion of Ukraine.

On whether Russia’s war effort could suffer, Mr Wyrebkowski said: “That’s definitely a medium to long term impact, we have to consider that Putin still has some foreign currency reserves, but he has been burning them at an astounding rate.

“Half of the reserves – worth about $300billion (£247billion) – are essentially frozen by the West, and from the very onset of the war Putin has essentially burned in the some $75billion (£62billion) during the conflict with Ukraine.

“If we are talking about the timescale of two, three or four years, we could see the collapse of both oil and gas, it will definitely have some impact on the ability of Russia to launch military action in Ukraine.”

Mr Sonnenfeld, who led the Yale study, also explained how the diverse sanctions levelled against Russia will damage its wider economy.

He added: “It just speaks to their inability to make payments, to receive compensation, that they have become such a rogue nation.

“To not be part of the global flows of finance is devastating, they are running a deficit as they are.

“They are an un-investable asset as they are in default, China won’t bail them out, that’s a huge problem. Other than cutting off their dependence on gas and oil exports, all they have to bring to the world market is grain and cyber-terrorism.

“If they can’t access any funds they are really in trouble.”

Although Putin has put up a typical strongman front during the war, it appears others in Moscow are concerned about the economic reality his decisions will have.

Russia’s central bank warned this week that its economic contraction will deepen in the third quarter of 2022, risking a devastating recession.

In the third quarter of 2022, Russia’s GDP (gross domestic product) is expected to fall by seven percent.

The central bank’s report added: “According to the Bank of Russia’s updated forecast, the contraction in 2022 will be less deep than expected in April.

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“At the same time, the impact of supply shocks may be more protracted over time.”

Figures within the EU are also confident that Russia will feel the pain of sanctions.

Josep Borrell, the EU’s foreign policy chief, told DW this week that Russia will “suffer the biggest recession since the World War or the end of the Soviet Union.”

He added that while Russia has cash, it is unable to use it in the European markets: “They have the money, but they cannot buy anything.”

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