A hypothetical total closure of trade relations between Russia and the EU due to the invasion of Ukraine would have an impact on the Spanish economy of a drop of 1.8% of GDP during the first year, according to an article published this Tuesday by the Bank of Spain.

If the conflict reduced its scope to the suspension of Russian energy imports, the damage to the Spanish economy would be a drop in GDP of between 0.8% and 1.4%, and an increase in inflation of between 0.8 points and 1.2 percentage points throughout the first year compared to a scenario without such restrictions.

With a cut in the Russian supply, the branches of the Spanish economy that would suffer a more pronounced drop in their production would be some of those that consume more energy intensively, such as transport, heavy manufacturing or the chemical industry. At the other extreme would be some service branches, such as real estate, whose activity would hardly be affected.

“A hypothetical interruption of imports of energy raw materials from Russia could have a significant impact on the Spanish economy. The difficulty in substituting these products in the short term would mean a reduction in the supply of energy and a worsening of the current inflationary episode, which which would imply, in both ways, a drag on economic activity”, points out the author of the article, Javier Quintana, from the Deputy General Directorate of Economy and Research of the Bank of Spain.

Quintana adds that the intensity of the impact of a cut in the Russian energy supply would be heterogeneous among the countries of the European Union (EU) depending on their energy dependence on that country. In the case of other European economies, the blow would be between 1.9% and 3.4% for Germany, 1.2% and 2% for France, and 2.3% and 3.9 % for Italy. The impact on the EU as a whole would be between 2.5% and 4.2% of GDP, reports Servimedia.

A hypothetical cessation of the rest of the trade flows with Russia would have an additional negative effect on the European economies, although its magnitude would be substantially less than that of the suspension of imports of energy raw materials.

The document also highlights “the propagation of the disturbance through global production chains”, especially intense in certain sectors of activity, such as transport, the basic metals industry or the chemical industry.

The direct effect of the increase in the energy cost for a specific sector in a given country would lead to higher prices for its products, which, in turn, would affect its customers in the rest of the sectors and countries, including Spain, reports Efe.

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