S&P Global chief economist warned on Tuesday that a financial shock could come if there was a “trade rift” between Russia and Germany.
Paul Gruenwald told CNBC on “Squawk Box Asia”: “Looking at a down scenario… there are different ways to play that but we think the way that is really going to move the macro needle is a trade rift. trade between Russia and Europe.
“This is not just cutting gas – whether Germany stops buying or Russia cuts gas,” he added.
After Russia’s unprovoked invasion of Ukraine, a number of world powers including the US, Japan and Canada attack Moscow with sanctions. The European Union is considering whether to ban oil imports from Russia, and has final pledge to cut dependence on Russian gas by two thirds.
Russia for its part requested that so-called “unfriendly” countries pay in rubles for gasrefers to measures that have imposed heavy economic sanctions aimed at isolating Russia for its unprovoked attack in Ukraine.
The European Union receives about 40% of its natural gas from Russian pipelines and about a quarter of that flows through Ukraine. Germany gets about half of its natural gas from Russia.
That will lead to… Lower GDP, lower employment, lower confidence – and then we’re going to get some kind of macro-financial shock out of that.
Paul Gruenwald
Chief Economist, S&P Global
Gruenwald added: “We have the energy complex, we have commodity prices, we have the industrial inputs that Europe imports, such as nickel and titanium and things like that. .”
Research and consulting firm Wood Mackenzie also warned that the global economy could undergo “more permanent changes” with global trade likely to be altered by the crisis.
“If the Covid-19 pandemic underscores the need to shorten supply chains, the war in Ukraine highlights the importance of having reliable trading partners,” research director Peter Martin wrote in a note on Tuesday.
“These forces could lead to a lasting reorganization of global trade. The global economy becomes more regionalized – shorter supply chains with ‘trusted’ partners.”
Trade between Germany and Russia
Gruenwald said the trade rift between Germany and Russia could affect the German manufacturing industry – one of three global production centers besides the US and China.
“That’s going to lead to… Lower GDP, lower employment, lower confidence – and then we’re going to get some sort of macro-financial shock out of that. So that’s the kind of drama. version that we’re worried about could move the needle,” he warned.
Trade between Germany and Russia has increased significantly in 2021 from the previous year, with the value of goods increasing by 34.1% to 59.8 billion euros ($65 billion), according to Germany’s Federal Statistics Office.
Germany’s imports from Russia increased significantly last year, up 54.2% compared to 2020. Exports also increased but at a slower rate than imports – up 15.4%.
The main products that Germany exports to Russia include vehicles, machinery, trailers and chemical products, according to the agency. Russia’s main exports to Germany include crude oil, natural gas, metals and coal.
Russia accounts for 2.3% of Germany’s total foreign trade and is the fourth most important country for German imports outside the European Union in 2021.
