Bloomberg the Company

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Follow Us

Industry Products

Russia Stands to Lose More Than EU on Gas Dispute, Capital Says

Don't Miss Out —
Follow us on:

April 11 (Bloomberg) -- Russia will probably avoid turning off the natural gas taps to Europe or Ukraine as its economy approaches a recession, according to Neil Shearing, head of emerging-markets research at London-based Capital Economics.

Russia “stands to lose more” than Europe from halting westward energy exports, Shearing said. The country’s oil and gas shipments to Europe are worth about 10 percent of its gross domestic product, according to Capital’s calculations.

Russian President Vladimir Putin threatened to halt natural gas shipments to Ukraine, raising the specter of disruptions in flows to Europe, unless its former-Soviet neighbor pays off its debt, according to an e-mailed copy of a letter to 18 European heads of state, distributed by the Kremlin press service. Russia’s economy, stock market and ruble are reeling from tensions with the European Union and U.S., which imposed sanctions after Putin annexed Crimea last month.

“Our house view is that we’re going to avoid the very worst-case sanctions, like trade blockades on both sides, Russia and Ukraine and Russia and Europe,” Shearing said in an April 8 interview in London. “If Russia puts constraints on Ukraine, Europe will respond and it’s neither side’s interest to go down that route. Russia is more vulnerable to sanctions than it’s currently perceived.”

Russia’s economy was already struggling before the conflict with Ukraine intensified this year, Liza Ermolenko, an analyst at Capital, wrote in an e-mailed note yesterday. Gross domestic product may have grown at a 0.5 percent annual pace in the first quarter, slowing from 2 percent in the last three months of 2013 and may “easily” slide into recession this year, she wrote.

The ruble has weakened 7.7 percent against the dollar this year, the second-worst performer among 24 emerging-market currencies tracked by Bloomberg after the Argentine’s peso. The dollar-denominated RTS Index fell 16 percent this year, compared with the MSCI Emerging Market Index’s advance of 1.1 percent.

To contact the reporters on this story: Agnes Lovasz in London at alovasz@bloomberg.net; Anna Andrianova in Moscow at aandrianova@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Torrey Clark, Alex Nicholson

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.