A total energy embargo against Russia is now unstoppable, whatever Germany thinks Business

The brakes at the Russian central bank have become few. The country does not need to tap into its frozen foreign exchange reserves to defend the currency as long as revenues from the sale of hydrocarbons and metals continue to come from today’s exceptional prices, and as long as Gazprombank is exempt SWIFT penalties.

“The fundamental foundation of the ruble is Russia’s current account surplus,” said TS Lombard’s Christopher Granville.

The Institute of International Finance expects the surplus to rise this year to between $200 billion and $240 billion due to rising energy prices and squeezing domestic demand. This will likely exceed all of China’s surplus in 2022.

Russia’s Finance Ministry said the country sold its Urals crude at $89 a barrel on average in March, equating to exceptional prices even after offering a sanctions discount. The Kremlin is certainly in difficulty on the battlefield but it is not yet short of money.

A bigger test comes this month as pre-invasion sales contracts fade and shippers struggle to secure insurance and financing for fresh Russian shipments.

The International Energy Agency says sales of crude oil and petroleum products could fall by 3 million barrels per day in April on total Russian exports of 7.8 million barrels per day.

But as long as Europe buys Russian oil, it is politically impossible to pressure India and East Asian consuming states, let alone China, to give up discounted barrels. on the free market. The oil will come out one way or another.

Germany’s business elites are leading a rearguard action to avoid further sanctions, warning of a dangerous chain reaction if governments succumb to the mood of the moment.

“Emotionally, you can understand an embargo. But if that happens, it will most likely tip the entire European economy into a recession with lasting consequences. We must not lose sight of this,” said Christian Sewing, president of the German Banking Association (BdB).

Martin Brudermuller, boss of chemical giant BASF, has predicted a catastrophic wave of bankruptcies. “If Russia’s gas supply were cut overnight, it could plunge Germany into the worst crisis since the end of World War II. Do we really want to destroy our entire economy? he told the Frankfurter Allgemeine.

Mr Brudermuller said BASF may have to close its Ludwigshafen plant, the world’s largest integrated chemical plant.

Consumers would learn a hard lesson in supply chains. “People seem to make no connection between a boycott and their own work. As if our economy and our prosperity were carved in stone,” he said.