A Russian Energy Import Boycott by Germany or the EU as a Policy Option?

In a study published in March 2022, several scientists examined how a possible boycott of Russia’s energy imports by Germany would affect the German economy (Bachmann et al., 2022)—according to their findings, a decline in real GDP of 0.5% to 3% is expected. Compared with the 4.5% drop in GDP in Germany in the corona recession of 2020, this initially appears to be a tolerable price to pay for an intended weakening of Russia’s economy and its ability to increase military spending and continue the war of aggression against Ukraine. It should be borne in mind, however, that Russia could forestall a boycott of energy imports by Germany, for its part, by implementing a partial or complete boycott of supplies of oil, gas, coal, and grain, and that Russia, moreover, could sell quantities of oil, gas, and coal that can no longer be sold in Germany at price discounts in the rest of the world economy. Incidentally, the modeling carried out by Bachmann et al. is not really a standard macroeconomic model as it is based on growth decomposition, which is an approach not really adequate for the problem under consideration. Of particular analytical interest could be a modified DSGE macro model with trade and direct investment (Roeger & Welfens, 2021, 2022), which consistently covers complex international effects or adjustment paths. In the event of an energy import embargo, Germany’s Bundesbank (2022) simulates a loss of real income of up to 5%; in addition, inflation would be 1.5 percentage points higher in 2022, and in 2023, there would be an additional inflationary push of a similar—perhaps slightly higher—magnitude.