On April 27, Russia cut off natural gas deliveries to Poland and Bulgaria due to their refusal to pay in rubles under pressure from Western financial, and economic sanctions, and NATO backing for Ukraine's defense. Due to a 20 percent increase in European gas prices despite the export restrictions, Russia may see a short-term increase in revenue. The most recent phenomenon also may increase the shock of energy prices for European consumers at little expense to Russia, possibly supporting its strategy that consumers will put pressure on European leaders to reconsider their shift away from Russian energy and support Ukraine.
Before the virus and the conflict in Ukraine, oil accounted for 40% of Russian exports and 25% of total government earnings in 2019; natural gas was a less important source of income at that time. Additionally, the Bundesbank forecasts a drastic drop in the economy and a significant impact to the German chemical industry if Russia does cut off natural gas supplies to Germany. Russian vulnerability to its reliance on oil revenue is growing despite the fact that COVID-19 is out of control in parts of an under-vaccinated China likely with more urban lockdowns, economic stress in commodity-importing emerging economies, Europe is heading for a sharp slowdown, and US monetary policy is about to tighten a lot.
To maintain its togetherness, I think Europe must strengthen its resistance to these increasingly likely energy trends. This includes more attempts to access alternate oil and natural gas supplies, such as US and international liquefied natural gas supplies, and accelerating energy efficiency and the switch away from fossil fuels while providing targeted transfers to help financially strapped households.
https://www.piie.com/blogs/realtime-economic-issues-watch/russia-europe-energy-bind-about-unravel
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