The UK would suffer a £70bn economic hit and be plunged into a recession if Europe banned Russian oil and gas imports immediately, Rishi Sunak has warned privately.
Boris Johnson has been urging EU allies to follow the UK’s own planned boycott on Moscow’s oil – and potentially gas – exports, to punish its invasion of Ukraine.
But The Independent has learned the chancellor fears the devastating impact on the UK economy if the EU acted now, underlining Europe’s collective reliance on Russia for its energy needs.
Mr Sunak told fellow ministers at a cabinet meeting that it would swipe up to £75bn from the UK economy “straight away” – the equivalent to about 3 per cent of gross domestic product (GDP), a source close to the discussions revealed.
That in turn would send the UK into recession in 2022, at a time when households are already facing the worst cost of living crisis in decades, sparked by rising inflation and soaring fuel and food bills.
It lays bare how – despite Mr Johnson’s call for countries to end their “addiction” to Russian hydrocarbons – there is some private relief in London that there is no all-out EU embargo.
There is pressure in mainland Europe for the EU to go further, which saw more than 100 MEPs sign a letter calling for Brussels to impose a ban immediately.
Mr Sunak told the cabinet last week that the move would lead to recessions across European countries, as well as in the UK.
As he flew to Saudi Arabia this week – to try to persuade the kingdom to turn on the oil taps – Mr Johnson likened Vladimir Putin to a drug dealer, urging European countries to “get ourselves off that addiction”.
The UK announced last week that it will end Russian oil imports by the end of the year, while “exploring options” to end gas imports as well.
In a co-ordinated series of moves, the US went further, announcing a ban on both oil and gas to deal “another powerful blow to Putin’s war machine”, Joe Biden said.
The EU plans to slash consumption of Russian natural gas by two thirds this year, while aiming for a complete break with its biggest energy supplier before 2030.
The task is much tougher for the EU, which depends on Russia for 40 per cent of its gas and around a quarter of its oil – compared with the UK’s 4 per cent and 8 per cent respectively.
Indeed, there have been fears that the Kremlin might turn off the supplies itself, in retaliation for western sanctions and the weapons sent to stiffen Ukraine’s resistance.
Instead, Russia is earning hundreds of millions of dollars a day from its oil and gas exports, undermining the sanctions and financing the war.
Germany has frozen the approval process for the Nord Stream 2 pipeline, which is designed to double the flow of Russian gas.
But the European Central Bank estimated that a 10 per cent drop in gas supplies would cut 0.7 per cent off GDP in the eurozone and said the fall “could be greater”.
A Treasury spokesperson said: “We continue to monitor the impacts that Putin’s invasion of Ukraine is having on the cost of living here, so we keep our approach under review.”
Source: The Independent. co.uk