© 2022 International Monetary Fund WP/22/145
IMF Working Paper
European and Research Departments
Natural Gas in Europe: The Potential Impact of Disruptions to Supply
Prepared by Gabriel Di Bella, Mark Flanagan, Karim Foda, Svitlana Maslova, Alex Pienkowski, Martin
Stuermer and Frederik Toscani*
Authorized for distribution by Laura Papi and Petya Koeva Brooks
July 2022
IMF Working Papers describe research in progress by the author(s) and are published to elicit
comments and to encourage debate. The views expressed in IMF Working Papers are those of the
author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: This paper analyzes the implications of disruptions in Russian gas for Europe’s balances and
economic output. Alternative sources could replace up to 70 percent of Russian gas, allowing Europe to avoid
shortages during a temporary disruption of around 6 months. However, a longer full shut-off of Russian gas to
the whole of Europe would likely interact with infrastructure bottlenecks to produce very high prices and
significant shortages in some countries, with parts of Central and Eastern Europe most vulnerable. With natural
gas an important input in production, the capacity of the economy would shrink. Our findings suggest that in the
short term, the most vulnerable countries in Central and Eastern Europe — Hungary, Slovak Republic and
Czechia — face a risk of shortages of as much as 40 percent of gas consumption and of gross domestic
product shrinking by up to 6 percent. The effects on Austria, Germany and Italy would also be significant, but
would depend on the exact nature of remaining bottlenecks at the time of the shutoff and consequently the
ability of the market to adjust. Many other countries are unlikely to face such constraints and the impact on
GDP would be moderate—possibly under 1 percent. Immediate policy priorities center on actions to mitigate
impacts, including to eliminate constraints to a more integrated gas market via easing infrastructure
bottlenecks, to accelerate efforts in defining and agreeing solidarity contributions, and to promote stronger
pricing pass through and other measures to generate greater energy savings. National responses and
RePowerEU contains many important measures to help address these challenges, but immediate coordinated
action is called for, with specific opportunities in each of these areas.
JEL Classification Numbers:
E23, F51, L71, L95, Q02, Q41
Energy supply; natural gas; production output
* The authors would like to thank John Bluedorn, Jorg Decressin, Oya Celasun, Alfredo Cuevas, Ting Lan, Laura
Papi, Andrea Pescatori, Agustin Roitman, Galen Sher and Jing Zhou for their helpful comments. We are also grateful
for excellent research assistance by Rachel Brasier, Chun Jin, Sabiha Mohona, Ben Park, Wei Zhao and Zeju Zhu.
