Chemical Giant BASF Warns of Catastrophic Economic Collapse if Russian Gas Exports are Halted

Chemical company BASF SE warned bureaucrats that cutting natural gas shipments into Europe would have a “catastrophic” impact on the economy not seen since the end of World War II, in yet another testament of the EU’s self-sabotage and its ineptitude to comprehend the dire implications of not playing nice with Russia’s energy supplies.

In an interview with Frankfurter Allgemeine newspaper, BASF CEO Martin Brudermuller explained that shutting off energy imports from Russia could decimate the existence of small and medium-sized energy-consuming industries, and send Germany’s— if not the EU’s entire economy— into the worst recession in over 75 years. Although “Germany could be independent from Russia gas in four to five years,” replacing shipments with LNG imports from the West will not be sufficient in the meantime, he cautioned.

“Merely putting on an extra layer of clothing or turning the heat down two degrees still won’t help,” he continued, because “Russia covers 55 percent of German natural gas consumption.” “That means if the EU’s gas supplies from Russia were cut off overnight, the economic system would suddenly be overloaded with a surge in unemployment and bankrupt companies— damage that would be irreversible,” Brudermuller said. “To put it bluntly: This could bring the German economy into its worst crisis since the end of the Second World War and destroy our prosperity. For many small and medium-sized companies in particular, it could mean the end.”

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Russian President Vladimir Putin, in the interim, does not appear to be backing down from his demand to receive rubles for natural gas payments. On Friday, Gazprom sent notifications to customers instructing them to open two accounts— one in rubles and one in euros, after which Gazprombank would make the foreign exchange conversion. Although gas shipments still continued to flow into Europe on Friday even for customers that haven’t made the switch yet, payments for current energy deliveries are not due until the end of April or beginning of May.

Still, the BASF CEO said that an immediate stoppage in gas supplies would be a major eye-opener for both Russia and the West: “A delivery stop for a short time would perhaps open the eyes of many – on both sides. It would make clear the magnitude of the consequences. But if we don’t get any more Russian gas for a long time, then we really have a problem here in Germany. At BASF, we would have to scale back or completely shut down production at our largest site in Ludwigshafen if the supply fell significantly and permanently below 50 percent of our maximum natural gas requirement.”

Brudermuller went on to explain that most Germans are not fully comprehending the magnitude of consequences that would stem from Russia turning off the taps. “Many have misconceptions. I notice that in many of the conversations I have. People often make no connection at all between a boycott and their own job. As if our economy and our prosperity were set in stone.”

The CEO pointed to rapidly rising consumers prices and the subsequent impact on the food supply chain, with BASF already being forced to scale back production of ammonia and fertilizer. “Most of the fertilizers that the farmers need this year have already been bought. In 2023 there will be a shortage, and then the poor countries in particular, for example in Africa, will no longer be able to afford to buy basic foodstuffs.”

Information for this briefing was found via the Frankfurter Allgemeine. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.