# Barclays warns of sub-parity euro, 5 ppt GDP hit if Russia turns off gas taps
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-05-13
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: Barclays warns of euro dive below dollar parity if Russia
Meta Description: Analysts at Barclays predict a 5% hit to euro zone GDP and euro falling below dollar parity if Russia halts gas supplies amid tensions over Ukraine.
URL: https://financedigest.com/barclays-warns-of-sub-parity-euro-5-ppt-gdp-hit-if-russia-turns-off-gas-tapshtml

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By Marc Jones

LONDON (Reuters) – Analysts at Barclays have warned of a 5 percentage point hit to euro zone GDP and a dive below dollar parity for the euro if Russia closes its gas taps as part of the escalating war in Ukraine.

Worries are mounting in Europe that Moscow could sharply reduce the amount of gas it supplies or even stop it altogether as tensions rise and sanctions intensify over its assault on Ukraine.

The Kremlin has already cut off supplies to Bulgaria and Poland and this week sanctioned Gazprom’s European subsidiaries including Gazprom Germania, prompting [Germany’s Economy Minister Robert Habeck to warn](https://www.financedigest.com/tesla-to-warn-of-data-privacy-risk-from-car-security-cameras-in-germany.html "Tesla to warn of data privacy risk from car security cameras in Germany") of no more gas from Russia.

If Russia closes its gas taps (to Europe), we expect EURUSD to [fall below parity,” Barclays said in a note](https://www.financedigest.com/dollar-falls-to-nine-month-low-as-powell-notes-progress-in-disinflation.html "Dollar falls to nine-month low as Powell notes progress in disinflation") on the rising tensions.

The euro is now at $1.03, having slumped around 8% in the [last three months](https://www.financedigest.com/monkeypox-emergency-could-last-months-with-window-closing-to-stop-spread-experts-say.html "Monkeypox emergency could last months, with window closing to stop spread, experts say").

Our economists estimate that a total loss of Russian supplies, combined with rationing of the remainder, could dent [euro area](https://www.financedigest.com/how-will-the-ecb-contain-fragmentation-risk-in-euro-area-bond-markets.html "How will the ECB contain fragmentation risk in euro area bond markets?") GDP by more than 5 percentage points over one year.

Pressure is now on Europe to secure alternative gas [supplies well before the winter](https://www.financedigest.com/ceraweek-europe-gas-supplies-to-stay-tight-2-more-winters-equinor-ceo-says.html "CERAWEEK-Europe gas supplies to stay tight 2 more winters, Equinor CEO says") sees temperatures drop again.

The EU is currently grappling with Russia’s demand that countries start paying for their gas in roubles rather than [euros or dollars](https://www.financedigest.com/pound-hits-10-month-peak-euro-up-as-dollar-under-pressure.html "Pound hits 10-month peak, euro up as dollar under pressure") as they traditionally have.

Bowing to such a demand could mean countries effectively breach their own sanctions brought against [Russia as part of a co-ordinated move by the West to punish Moscow for its “special military operation”](https://www.financedigest.com/kfc-franchisees-in-russia-ask-govt-to-halt-sale-of-stores-to-local-operator-ria.html "KFC franchisees in Russia ask govt to halt sale of stores to local operator – RIA") in Ukraine.

A recent report by credit [ratings giant Moody’s warned](https://www.financedigest.com/powells-warning-on-higher-u-s-rates-pushes-dollar-to-3-mth-high.html "Powell’s warning on higher U.S. rates pushes dollar to 3-mth high") that a halt to the energy trade between Russia and Europe would lead to recessions around the world

About 25% of the nearly 4,000 non-financial [companies Moody’s analyses globally would “face](https://www.financedigest.com/factbox-what-european-companies-are-doing-as-workers-face-high-inflation.html "Factbox-What European companies are doing as workers face high inflation") significant stress” it said, although it would be a significantly higher 40% in the Europe Middle East and Africa (EMEA) region.

It “will cause significant stress [around the world”](https://www.financedigest.com/old-trafford-attracting-not-just-footballers-from-around-the-world-but-also-investors.html "Old Trafford attracting not just footballers from around the world, but also investors") Moody’s said.

![Europe natural gas imports from Russia](https://www.globalbankingandfinance.com/wp-content/uploads/2022/05/Pasted-image-1651650909918.jpg)

(Reporting by Marc Jones; editing by Dhara Ranasinghe and Kim Coghill)


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