Recession in Europe ‘May Actually Be Positive’ for US

WASHINGTON (Sputnik) - The US could benefit from a recession in Europe, which could come as a result of a reduction in Russian gas supplies, but will suffer if Moscow refuses to export oil, the Washington Post reports citing sources.

A senior administration official who spoke on the condition of anonymity told the outlet the impact of a European recession on the US would likely be "modest and manageable" since trade with Europe account for less than 1% of US gross domestic product. The estimate comes from data compiled by the US Treasury Department and Council of Economic Advisers.

"We’re in such a perverse situation here it may actually be positive," Dean Baker, an economist and co-founder of the Center for Economic and Policy Research, told the Post.

However, the newspaper warned on Sunday that while the US produces enough of its own natural gas and would not be much impacted by a reduction in Russian gas exports, a complete shutdown of Russian oil exports would seriously harm the US economy.

"If Europe plunges into a depression after Russia shuts off energy exports and oil rises to $150 a barrel - there’s a possible impact to the US there that’s really bad," Matthew J. Slaughter, an economist at Dartmouth College, told the outlet.

Mark Zandi, an economist at Moody’s Analytics, told the newspaper that gasoline prices would go back over the record $5 a gallon almost overnight if Russia refuses to export oil.

"The economy can’t digest $5 a gallon — that would be overwhelming," Zandi warned.

G7 finance ministers confirmed on September 2 their intention to impose price caps on Russian oil as part of expanded sanctions campaign against the country due to its special operation in Ukraine.

The price cap will take effect on December 5 for crude oil and on February 5, 2023, for refined products coming from Russia. Moscow, in turn, pledged to stop exporting Russian oil to the states that would apply the limits.

European Commission President Ursula von der Leyen said that the European Union may introduce limits on the price of Russian natural gas. This past Friday, EU energy ministers held a meeting to discuss the introduction of a price cap on gas but failed to do it.

According to Italian Minister for Ecological Transition Roberto Cingolani, 15 EU member states voiced support for a common price cap for imported gas, with three nations backing this measure for Russian gas only and five either opposing the idea or expressing neutrality.