December 8, 2022

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Nord Stream, what happens to Italy if there is a Russian gas shutdown from October

The damage in recent days to Lines 1 and 2 of Nord Stream, the gas pipeline connecting Russia to Europe, in the Baltic stretch between Denmark and Sweden, immediately caused gas prices to rise, prompting debate about the effects. The conflict in Ukraine over homes and businesses. In general, it is a question of understanding the scenario that can be faced in the event that Moscow decides to resort to the gas weapon, and permanently turn off the tap, in the context of an increasingly tug-of-war with Europe and the USA. About the war file in Ukraine.

Nadef Alternative scenario: zero gas imports from Russia as of October

A hypothesis that the government led by Mario Draghi has evaluated. And he did it again (lOr already done in Def) in text tease, or the Defense Update that got the green light from the Cabinet. “With regard to supplies – as stated in the document – the trend scenario is affected by an additional decrease in Russian gas imports, and not their complete removal. Therefore, an alternative scenario has been developed for the complete interruption of flows from Russia starting in October ».

In recent months, the flow of Russian gas has continued with sharp price increases

If two risk scenarios focusing on a price shock with or without gas shortages are taken into account in Def at the end of March, “the developments in recent months – as Nadef reads – were more similar to the price shock scenario. Then, in detail: Russian gas flows continued inland but was accompanied by significant price increases in the face of a stockpiling campaign by all European countries.For the time being – the document still reads -, given the proportion of storage filling close to the target of 90% and the continuation of imports in September from Russia, albeit in lower volumes Much more than in the past, the risk-taking scenario that seems more appropriate is that of Complete shutdown of supplies from October onwards. Like the trend scenario, it was assumed that the monthly storage level could never fall below the Italian strategic reserve.

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Simulation: what could happen

What would happen next in this scenario, or if Russia decides to shut off the gas spigot towards Italy in October? And the word goes again to NADPH: in the simulations conducted “it was assumed that the complete absence of flows from Russia leads to a 20% increase in average prices for natural gas, electricity and oil compared to the trend scenario in the fourth quarter of this year and 2023 .In 2024 and 2025, prices will rise by 10% and 5%, respectively.Simulation results suggest a cumulative contraction in 2022 and 2023 of 4.9% (and 7.7% in 2022-2025), only slightly less than what is considered necessary but It can be supplemented with behavioral behaviors in response to a dream containment plan.”

If Russian gas stops GDP for October + 0.1% 2023

Here are the macroeconomic effects associated with the risk scenario: “Low GDP growth compared to trend is 0.2 percentage point in 2022 (hence +3.1%, ed)) and 0.5 percentage point in 2023 (+0.1, ed), while it will be higher by 0.4 percentage point in 2024 and 0.2 percentage point in 2025 due to the rebound effect.The nominal GDP growth rate will decline more moderately due to the more sustainable trend of the deflation factor, decreasing by 0.1 percentage point this year compared to the trend, and 0.3 percentage point in 2023 and an increase of 0.2 percentage point and 0.1 percentage point respectively in 2024 and 2025. These – we continue to read in Nadef – are significantly lower than those estimated in the Def risk scenarios. alternative sources, as well as continued flows of natural gas from Russia.”

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