Russia’s squeeze on the gas market helped it to generate $50bn (6% of GDP) in total gas exports in the first half of this year, 2-3 times more than normal. Russia’s balance of payments is in such a strong position that, if oil prices and oil exports remain at current levels, Russia could keep gas exports to Europe at 20% of normal levels for at least three years. Whether or not Russia turns off the taps completely will be a political decision and the length of any cut-off would depend on the size of offsetting oil revenues. Our view is that Russia could cut off gas for just over one year without adverse consequences for the economy.
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