Romania relatively unaffected by Russian gas cut-off

Photographer: Eddie Seal/Bloomberg

Poland, Lithuania and Romania would be the least exposed if Russian gas supplies to Central and Eastern European (CEE) states suddenly stopped. Meanwhile, Slovakia, Hungary, and the Czech Republic would be hit the hardest.

So far, Russia has cut off gas supplies to Poland and Bulgaria while other EU members have had their gas supplies reduced. Recovering from a sudden and total loss of the supply would take the CEE states more than three years, according to a Fitch analysis.

To make the prediction, Fitch analysts built a vulnerability matrix showing EU countries’ reliance on Russian gas imports. They discussed with energy ministers of all CEE EU members and took national policies, such as price-setting, into consideration, among other factors.

Fitch concluded that a sudden loss of Russian natural gas supplies to the CEE would bring about a significant macro shock, causing negative growth and higher inflation. The mitigating factors, such as various policies, would mean that not all states would be impacted the same way.

Slovakia, Hungary, and the Czech Republic rely heavily on Russian gas, and would therefore be the most exposed. They also lack short-term alternative energy supplies. On the other end of the spectrum, Poland, Lithuania, and Romania either have the necessary alternatives or can boast of significant domestic production.

Romania is ranked as having a low vulnerability to a sudden cessation of Russian gas supplies due to its highly impactful mitigants. Romania’s domestic gas production covers 80 to 90% of the country’s consumption and the offshore gas projects under development in the Black Sea would compensate for the rest and could also turn the country into a gas exporter in the future.

States like Slovenia, Latvia, Estonia, Croatia, and Bulgaria have a medium-level overall exposure to the same risk.

Fitch Ratings is one of the most important American credit rating agencies, along with Moody’s and Standard & Poors.

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