Germany’s economy could lose $240 billion — 6.5% of its annual output — over the next 2 years if Russian oil and gas were cut off immediately

• Germany is under increasing pressure to ban Russian energy imports over the Ukraine war.
• An immediate ban on Russian energy would send Germany into “a sharp recession,” per a report by economic institutions advising Berlin.
• Germany could lose $240 billion, or 6.5% of its annual economic output, over two years if Russian gas were halted.

Germany could lose 220 billion euros ($240 billion) in economic output over the next two years if Russian gas were halted immediately. That’s according to a joint economic forecast, called the Gemeinschaftsdiagnose report, released Wednesday by economic institutions advising Berlin.

Europe’s largest economy has come under increasing pressure to ban Russian energy imports amid reports of Russian atrocities in Ukraine. But Germany is heavily reliant on Russian gas, which accounted for 55% of Germany’s gas imports in 2021 and 40% of its gas imports in the first quarter of 2022, Reuters reported.

An immediate embargo on Russian oil and gas supply would send Germany into “a sharp recession” with a 6.5% hit to its annual economic output, according to the Gemeinschaftsdiagnose report.

“The decision to become independent from Russian supplies of raw materials is likely to remain valid even when the military and political situation calms down again,” the report said, per a Bloomberg translation. “That means part of the energy supply and energy-intensive industry must realign itself.”

Germany also faces the risk of gas-supply disruption initiated by Russia as President Vladimir Putin last month signed a decree requiring countries importing Russian gas to pay in rubles. He threatened to cancel existing contracts of those that didn’t comply, Reuters reported.

In response, Germany activated an energy emergency plan. The country is now in the “early warning phase” of the plan, with Berlin calling for all energy consumers — both industry and households — to save energy and reduce consumption. If the situation worsens, the European manufacturing powerhouse might ration gas in the last of the three-stage plan, with industry first in line for power cuts, as outlined by Germany’s economy ministry. The move could devastate the economy and lead to job losses.

Due to the war in Ukraine, German banks were expecting the country’s GDP growth to slow to 2% in 2022 from 2.7% in 2021, Reuters reported last week, citing Deutsche Bank CEO Christian Sewing, who was speaking in his role as president of Germany’s BDB bank lobby.

Germany will wean itself off Russian gas by 2024, Germany Economy Minister Robert Habeck said in a March 25 press release.