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‘An unprecedented situation’: How would a gas embargo impact Austria?

As the war in Ukraine continues, it is expected that imports of Russian energy will be targeted next by EU sanctions. What could it mean for Austria?

The French government has published guidelines on what to do if you are struggling to pay your energy bills.
The Italian government has announced further discounts on energy bills and caps on petrol taxes. (Photo by Ina FASSBENDER / AFP)

EU leaders are currently discussing possible new sanctions on Russian oil and gas in response to Russia’s invasion and subsequent war in Ukraine.

But while most EU countries are united in their condemnation of the war and support of sanctions, cracks are starting to show when it comes to a possible embargo on the import of Russian gas.

Austria has been very vocal about its opposition to sanctions on Russian energy – mostly because Russian gas imports account for 80 percent of Austria’s entire gas consumption. 

Germany is also hesitant to support such a move as the country depends on Russian gas for around 50 percent of its total supply.

In the meantime, economic experts are trying to predict the impact of sanctions on economies within the EU – something that is not easy due to the unprecedented nature of the situation. 

Here’s what it could mean for Austria.

FOR MEMBERS: How will the war in Ukraine impact the cost of living in Austria?

What would an embargo on Russian gas mean for the economy?

A recent report by the Conseil d’analyse économique (CAE) – an economic research institute for the French government – states the economic impact of sanctions on Russian gas would lead to a decline of 0.15 to 0.3 percent on gross national income in France. 

France currently sources around 20 percent of its gas supply from Russia.

According to the CAE, the impact on Germany would be higher at 0.3 percent at the lower level, but possibly up to 3 percent. This is related to Germany’s higher dependency on Russian gas compared to France.

The report further states that economies in Lithuania, Bulgaria, Slovakia, Finland and the Czech Republic could see national income drop between one and five percent. This is due to a high reliance on Russian gas imports within these countries.

Austria is not mentioned in the report but to provide a comparison, Slovakia currently sources 85 percent of all gas from Russia – just five percentage points higher than Austria.

Michael Landesmann, Senior Researcher at the Vienna Institute for International Economic Studies (WIIW), told The Local: “There is not an equivalent study for Austria yet so we are a bit in the dark, but so are other modellers. It’s an unprecedented situation.”

However, Landesmann added: “​​If there was a study in Austria, it would show a similar impact to Germany, but there could be some flexibility of supply in Austria and room for negotiation because it’s a smaller country than Germany.”

READ MORE: ‘Gas and blackmail’: How Russia reported the Austrian Chancellor’s visit

Additionally, he said there are different ways that EU sanctions could be implemented to lessen the impacts and to avoid a permanent stop to the supply of Russian gas. 

Landesmann, who is also a Professor of Economics at Johannes Kepler University Linz, said: “We could possibly stop gas imports for three months. This could have a significant economic impact on Russia, and it would be a diplomatic gesture. 

“This approach would require the skilful use of existing resources and a redistribution of gas to the most important needs. But if you move industries into temporary short-time work, like in the Covid crisis, it’s not the end of the world.”

Landesmann believes the coming warmer months could be the right time to place temporary restrictions on the import of Russian gas and stressed the biggest impact on households would be a rise in prices, which could then be offset with subsidies.

He said: “We are still far away from winter, so the issue is how we use the months in between.”

But if such an approach was taken by the EU, the big question is whether Russia’s President Vladimir Putin would then be prepared to return to previous supply levels later in the year.

Landesmann said: “Of course, the whole thing would depend on the reaction of Russia, but it would be irrational of Russia to stop all gas supplies due to the economic impact [in Russia].” 

Prior to Russia’s invasion of Ukraine, Elisabeth Christen, Senior Economist at the Austrian Institute of Economic Research (Wifo), told The Local that while the EU is dependent on gas supplies from Russia, it is a “mutual dependency”. 

READ ALSO: Ukraine: What does the government’s ‘gas alert’ mean for Austria?

Which Austrian industries would be most impacted by an embargo? 

Industries in Austria with a high reliance on natural gas include chemical, agriculture, pharmaceutical (although this sector is smaller than in Germany) and steel.

This means an embargo on Russian gas would hit these industries harder than others, but Landesmann believes there are ways to mitigate the impacts.

He told The Local: “An embargo would involve a lot of changes for these industries and there could be job stoppages involved, but we know how to deal with this from the Covid crisis. We can keep people employed without them actually working.”

According to Landesmann, another possible solution could be an EU-wide initiative to redistribute the supply of gas across the bloc, which would reduce the impact on countries most impacted by an embargo.

However, as there would be less gas flowing into the country, there would still be some tough decisions to be made about which industries in Austria to prioritise with a limited gas supply.

What action has Austria already taken in response to the crisis?

The Austrian federal government has already activated the country’s gas alert system, placing Austria on level one of the three-tiered emergency plan.

The emergency plan was activated after Russia announced that future gas deliveries can only be paid for with Rubles as a consequence of international sanctions resulting from Russia’s invasion of Ukraine. 

So far, the supply of gas from Russia to EU countries has not been interrupted and contracts are still being fulfilled.

The Austrian Federal Government has also brought in a new gas storage law to ensure the country has a back up supply of 12.6 terawatt hours of gas. According to the Wiener Zeitung, this is equivalent to the average consumption of gas during a cold winter month in Austria.

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Rapping, breakdancing Ukrainians win Eurovision in musical morale boost

Ukraine won the Eurovision Song Contest Sunday with an infectious hip-hop folk melody, boosting spirits in the embattled nation fighting off a Russian invasion that has killed thousands and displaced millions of people.

Rapping, breakdancing Ukrainians win Eurovision in musical morale boost

Riding a huge wave of public support, Kalush Orchestra beat 24 competitors in the finale of the world’s biggest live music event with “Stefania”, a rap lullaby combining Ukrainian folk and modern hip-hop rhythms.

“Please help Ukraine and Mariupol! Help Azovstal right now,” implored frontman Oleh Psiuk in English from the stage after their performance was met by a cheering audience.

In the Ukrainian capital Kyiv, the triumph was met with smiles and visible relief.

“It’s a small ray of happiness. It’s very important now for us,” said Iryna Vorobey, a 35-year-old businesswoman, adding that the support from Europe was “incredible”.

Following the win, Psiuk — whose bubblegum-pink bucket hat has made him instantly recognisable — thanked everyone who voted for his country in the contest, which is watched by millions of viewers.

“The victory is very important for Ukraine, especially this year. Thank you from the bottom of our hearts. Glory to Ukraine,” Psiuk told journalists.

Music conquers Europe

The win provided a much-needed morale boost for the embattled nation in its third month of battling much-larger Russian forces.

Mahmood & BLANCO  performing for Italy at Eurovision 2022

Mahmood & BLANCO perform on behalf of Italy during the final of the Eurovision Song contest 2022 in Turin, Italy. (Photo by Marco BERTORELLO / AFP)

“Our courage impresses the world, our music conquers Europe!” he wrote on Facebook.

“This win is so very good for our mood,” Andriy Nemkovych, a 28 year-old project manager, told AFP in Kyiv.

The victory drew praise in unlikely corners, as the deputy chief of the NATO military alliance said it showed just how much public support ex-Soviet Ukraine has in fighting off Moscow.

“I would like to congratulate Ukraine for winning the Eurovision contest,” Mircea Geoana said as he arrived in Berlin for talks that will tackle the alliance’s expansion in the wake of the Kremlin’s war.

“And this is not something I’m making in a light way because we have seen yesterday the immense public support all over Europe and Australia for the bravery of” Ukraine, Geoana said.

British Prime Minister Boris Johnson called the win “a clear reflection of not just your talent, but of the unwavering support for your fight for freedom”.

And European Council President Charles Michel said he hoped next year’s contest “can be hosted in Kyiv in a free and united Ukraine”.

‘Ready to fight’
Despite the joyous theatrics that are a hallmark of the song contest, the war in Ukraine hung heavily over the festivities this year.
The European Broadcasting Union, which organises the event, banned Russia on February 25, the day after Moscow invaded its neighbour.
“Stefania”, written by Psiuk as a tribute to his mother before the war, mixes traditional Ukrainian folk music played on flute-like instruments with an invigorating hip-hop beat. The band donned richly embroidered ethnic garb
to perform their act.
Nostalgic lyrics such as “I’ll always find my way home even if all the roads are destroyed” resonated all the more as millions of Ukrainians have been displaced by war.

Kalush Orchestra received special authorisation from Ukraine’s government to attend Eurovision, since men of fighting age are prohibited from leaving the country, but that permit expires in two days.

Psiuk said he was not sure what awaited the band as war rages back home.

“Like every Ukrainian, we are ready to fight as much as we can and go until the end.

Britain’s ‘Space Man’

Ukraine beat a host of over-the-top acts at the kitschy, quirky annual musical event, including Norway’s Subwoolfer, who sang about bananas while dressed in yellow wolf masks, and Serbia’s Konstrakta, who questioned national healthcare while meticulously scrubbing her hands onstage.

Coming in second place was Britain with Sam Ryder’s “Space Man” and its stratospheric notes, followed by Spain with the reggaeton “SloMo” from Chanel.

After a quarter-century of being shut out from the top spot, Britain had hoped to have a winner in “Space Man” and its high notes belted by the affable, long-haired Ryder.

Britain had been ahead after votes were counted from the national juries, but a jaw-dropping 439 points awarded to Ukraine from the public pushed it to the top spot.

Eurovision’s winner is chosen by a cast of music industry professionals — and members of the public — from each country, with votes for one’s home nation not allowed.

Eurovision is a hit among fans not only for the music, but for the looks on display and this year was no exception. Lithuania’s Monika Liu generated as much social media buzz for her bowl cut hairdo as her sensual and elegant

Other offerings included Greece’s “Die Together” by Amanda Georgiadi Tenfjord and “Brividi” (Shivers), a duet from Italy’s Mahmood and Blanco.

Italy had hoped the gay-themed love song would bring it a second consecutive Eurovision win after last year’s “Zitti e Buoni” (Shut up and Behave) from high-octane glam rockers Maneskin.