“A clear recession in Germany would presumably be inevitable.”
That was Deutsche Bank Chief Executive Officer Christian Sewing, in reported comments at a press conference on Monday discussing the fallout from a potential cutoff in Russian oil and gas.
“If it was to come to an import embargo, and you have to keep this in mind, then we could be talking about inflation that’s at least temporarily, is temporarily in the double digits,” Sewing said, in his capacity as the president of Germany’s BDB bank lobby. “But we’ll permanently have a phenomenon that we all haven’t seen in the last 30 years and that’s longer-term inflation.”
His comments come as Europe and the world reels over images of the recently liberated Kyiv suburb of Bucha over the weekend that purported to show war crimes committed by Russian troops, with hundreds of unarmed citizens believed to have been killed.
In response, German Chancellor Olaf Scholz has vowed new sanctions from the West in coming days, but the country’s finance minister Christian Lindner reportedly said Monday that cutting off Russian energy supplies could not happen immediately.
The shocking images from Ukraine are heaping pressure on Brussels to push for sweeping sanctions on Russian oil and gas, but countries such as Germany have previous resisted due to its reliance on that country.
Germany last week reported the highest consumer prices since reunification of the country in 1990. The country has already seen some shortages and higher prices since Russia first invaded Ukraine in late February. Oil prices
climbed Monday on the prospect of tighter sanctions on Moscow.
Sewing said that German banks are now forecasting a sharp pullback in growth this year due to the war in Ukraine, of around 2%. “The situation would be even worse if imports or supplies of Russian oil and natural gas were to be halted. A significant recession in Germany would then be virtually unavoidable,” he said, adding that the government would need to provide aid to companies and hard-hit sectors in that case.
For all the sanctions hitting Russia, its oil sales are helping to bankroll the war in Ukraine. Crunching numbers recently, Bloomberg estimated that if Russia’s biggest trade partners don’t cut ties, the country stands to earn close to $321 billion from energy exports, a third higher than last year.
“How many #Bucha before we move to a full oil and gas Russia embargo? Time is over,” tweeted on Sunday Enrico Letta, the secretary of the Democratic Party in Italy, a country also heavily reliant on Russian energy.