Europe's Russian Connections

Tyler Durden's picture

The conflict in Ukraine and the related imposition of sanctions against Russia signal an escalation of geopolitical tensions that is already being felt in the Russian (and increasingly world) financial markets.




As The IMF describes in this chartapalooza, a deterioration in the conflict, with or even without a further escalation of sanctions and counter-sanctions, could have a substantial adverse impact on the Russian economy through direct and indirect (confidence) channels. But, perhaps more importantly to the West-sponsored IMF, what would be the repercussions for the rest of Europe if there were to be disruptions in trade or financial flows with Russia, or if economic growth in Russia were to take a sharp downturn?


Via The IMF (authored by Aasim M. Husain, Anna Ilyina and Li Zeng),

To understand which countries in Europe might be most affected, we looked at the broad channels by which they are connected to Russia—their trade, energy, investment, and financial ties.


We find that Eastern European countries have the closest links with Russia and some of them could be seriously affected by a sharp slowdown of the Russian economy or a ratcheting up of sanctions and countersanctions. Western European countries are relatively less linked but some could also see significant effects. These conclusions, of course, are based broadly on the potential channels rather than a quantification of the potential impact, which anyway could be dominated by confidence effects from geopolitical tensions.

Trade links  

For most European countries, Russia is not a major export market (Chart 2). Therefore, slower growth in Russia would probably not hurt them too much. However, for many of Russia’s immediate neighbors such as Belarus, Ukraine, Moldova, and the Baltics, whose exports to Russia exceed 5 percent of their respective GDP, the impact could be substantial.

Chart 2


But European countries depend more on Russia on the import side—particularly gas and oil (Chart 3). Moreover, in some countries certain industries—such as chemicals and minerals, metals, and manufacturing equipment—rely heavily on inputs from Russia. These industries stand to face a disproportionate impact if there are trade disruptions or price increases on energy imports from Russia.

Chart 3



Energy supply

Europe relies on Russian gas, importing over one third of its natural gas from Russia through several major pipelines (the dotted line on the map is the planned South Stream gas pipeline). Russian gas accounts for over 50 percent of total gas consumption in virtually all countries in Eastern Europe and several advanced economies in Europe as well (Chart 4). However, as a share of total energy—rather than gas—consumption, Russian gas is somewhat less critical but still very important for several countries and especially so for Belarus and Moldova (Chart 5).

In the event of a price increase or disruption in gas supplies from Russia, countries’ ability to access alternative suppliers or energy sources will vary. For some countries, particularly those whose energy infrastructure is less nimble and whose gas inventories are relatively low, the transition could take longer and be more consequential. For example, the pipeline via Ukraine has the largest capacity and transports almost half of Europe’s gas imports from Russia, and so any disruption in the flow through that particular pipeline would have potentially serious effects on countries whose energy infrastructure relies heavily on it. Many European countries also depend heavily on oil imports from Russia, but those are easier to substitute from other suppliers than gas imports.

Chart 4


Chart 5 



Investment flows

Foreign direct investment (FDI) from Russia, in industries such as banking, energy, and metal and mining, exceeds 5 percent of GDP for Belarus, Bulgaria, Moldova, and Montenegro (Chart 6). 

Chart 6 



A number of advanced economies, notably Netherlands and Ireland, have significant FDI in Russia as well (Chart 7). Financial centers, such as Cyprus, Luxembourg, also report high two-way FDI flows.

Chart 7



Financial links

Many Western banks have sizable exposures to Russia. Notably Austrian, Hungarian, French, and Italian banks have subsidiaries in Russia and also lend directly to customers in Russia from their branches outside Russia (Chart 8). For some of these banks, their Russian operations have accounted for a large share—in some cases over one third—of their profits in the last few years. 

Chart 8


The same Western banks also lend to other countries in Central, Eastern and Southeastern Europe (CESEE). In Chart 9, the outer ring shows the largest common creditor countries (and their major financial institutions) which account for 60 percent of the total cross-border lending to the CESEE region. In the middle are the recipients, with Russia accounting for about one third of the region’s total borrowing from these creditors. Hence, if a large shock to Russia triggers a reassessment of regional risks by common creditors, it could result in a broad pullback in lending to other countries too.

Chart 9


Foreign portfolio investments to Russia are also sizable, given that Russian assets account for 6–12 percent of emerging market benchmark indices. But there has been little sign of contagion to other Eastern European markets so far,even as Russia’s spreads widened sharply following developments in Ukraine, spreads of most other CESEE sovereigns drifted lower (see Chart 1).

The color-coded maps above can be summarized as follows:




*  *  *

Two words - blowback... and boomerang... come to mind.


Source: The IMF

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goldhedge's picture

Famous American saying: "FUCK EUROPE"

Vampyroteuthis infernalis's picture

Go for it Obammy. Poke the bear! The blood will be on your hands and future generations will remember you for the pointless war.

crazybob369's picture

What future generations? If the US & Russia go to war, we all die.

Newsboy's picture

Here is a "peak cheap gas" mapping assessment of Ukraine, Russia, etc.

Where's it come from? Where's it go?

max2205's picture

The IMF is the US.

Why would we believe Barry?

FlyinHigh's picture

Great read & explanation Thank You.

Kirk2NCC1701's picture

So, the UK and Malta have no exposure.  Bullish for the Anglo-American Alliance, and their ability/eagerness to dance to Zio-AIPAC's tune.

And the rest of Europe has what specific and "must-have" benefits from said Alliance and compliance to Zio-Agenda (emanating from DC, NY and Tel Aviv)?

I can't think of a single service or product that the Europeans truly need, whose absence would make their lives miserable, or even worse. But I can think of lots of MIC and Bankster reasons why the AA Alliance needs Europe:  Sell MIC-ware, sell GS papware, and play currency games with the ECB that keep the USD in the throne as the GRC.

Time for Europe to tell the AA Alliance to go fuck itself.

grekko's picture

Obama could care less how much blood is on his hands.  He'll be well taken care of for destroying what was left to america after Bush and Darth Chenney.

crazzziecanuck's picture

Indeed.  A neutered or chaotic Russia is in Washington's best interest so they have been taking steps to ensure this happens.

Like Afghanistan, or Iraq or even Libya, if the Americans cannot control their resources, then no one else can.  Hence, chaos everywhere.

Fuku Ben's picture

I'm sure it is just coincidence

Chart 9 (Saturn) --> 6 pointed star (Saturn) --> 3D cube (Saturn) = Eye of Saturn

Kirk2NCC1701's picture

[sigh]  Let's keep our shorts on.  When you have 6 circles/entities, and you space them evenly, you get that shape.  Geometry 101. 

In fact, a lot of so-called "sacred" shapes have NO "sacred" or "magical" power associated with them, other than the "magic" of the Jedi Mind Trick of its practitioners over dumbass sheeple, who buy into that crap.  "Magic" is just a marketing label these charlatans put on natural geometries.  Geez, can you be conned so easily?

tony wilson's picture

fuck off captain pickard

saturn runs time cube you cunt

the yids need the babies dead for torah bora ritual

ocs101 on you tube nose best not you

you fuckin muppet : )

HardlyZero's picture

Looks like 20 boomerangs heading back to Europe.

15 boomerangs in Central, Eastern, South-East Europe.

5 'rangs: Cyprus, Netherlands, Luxembourg, Finland, Ireland !

Push-me Pull-you.


Massive financial contagion.

Would all 20 go BRIC ?

debtor of last resort's picture

The Netherlands? You mean Shell? Importing gas from Russia and exporting it again for a profit?

Energy markets are the casino place to be for the coming endgame.

HardlyZero's picture


Until there are viable 3rd gen Nuclear Plants outside of France and Japan, and Germany would need to start those too.

Energy will rule the world.


Who runs World-town ?

crazzziecanuck's picture

Starting up a nuclear plant will cause serious problems in the German electrical grid.  It wasn't just public pressure and Fukishima that pushed the Germans to start shutting down these plants, those plans were already in the works well before 2011, it's because starting and stopping a nuclear plant to regulate the grid and provide power in a way that doesn't cause problems just cannot be done in concert with "renewables."  That's why when people say "we want a wind farm" they're shocked when they see a natural gas plant being built right along beside it to provide the power when these facilities aren't generating power at all (i.e., at night or when it's cold).  It's really easy to start up a fossil-fuel boiler.  That's why last year Germany built 13 coal-fired plants.

So, Germany could restart their nuclear plants but they'd have to backpedal on their policy to develop "renewables."

The comprehensive solution to both the energy and garbage and inequality problems is REDUCTION.  People have to stop buying uneeded crap and stop thinking that by shopping at Walmart that you are saving your neighbor's job.  The environment is going kaput so your neighbor wont have a job then either...

HardlyZero's picture

Generally all the oil/natgas is 'peak'.

While nuclear can expand for a long time.

Given that, nuclear will be necessary for worldwide populations over 500 million.

If we plan to visit planets and stars, nuclear is fundamental.

Its radioactive, and necessary if population grows or expands to the stars.

Kirk2NCC1701's picture

IOW:  "No financial instrument that is controlled by or originates from the US".

Got it:  "Fed-proof and NSA-proof Russia".  Makes sense.

williambanzai7's picture

Obozo is the boomerang

Atomizer's picture

Boomerang, you're probably right. I call him a buffoon. 

Yen Cross's picture

" Podium Primate", works for me?

Doom and Dust's picture

Easy to see from that last chart why the civilian plane used to frame Russia should carry so many Dutch.

q99x2's picture

Guess that settles it. Washington D.C. can fuck off.

Karaio's picture

You do not understand. 

You mix everything in the same bag. 

Do not understand the concept of Slavic as not differentiate Sunni Shia. 

This is the great error of the USA. 

Also did not differentiate the "red", the original land, have always considered the Indians, did not distinguish the tribes. 

Had different color was indium, indium combines with lead. 

I'm tired of getting experts on Latin America in Brazil who only speak Spanish, do not know that in Brazil we speak Portuguese. 

Americans who know best the world are the guys Jehovah's Witnesses religion. 

These I respect, like to talk to them about geopolitics. 

'm Christian Catholic Apostolic Roman practitioner. 

If Obama had some guys Jehovah's Witness in front of him on foreign policy, probably would not do so many droppings.

Karaio's picture

Let me give an example of what is to be Slavonic: 

The family my father is the Godzawa clan, it is here: (herb_szlachecki) 


Yen Cross's picture

 Ain't NO Union Pay for the USA!   320 million "walled-in" serfs and growing!

NidStyles's picture

How else do you win the paper war than to force your population to use your product at the threat of imprisonment, where you still extract "wealth" from his ass anyways...

MalteseFalcon's picture


Eggs will be broken to make this omlet.  Somebody else's eggs.


d edwards's picture

Instead of a star design, perhaps an octopus would have been more accurate.