However the situation is so volatile and unpredictable that no one can be sure of what happens in the event of a complete Russian gas shutdown. The current price shock has already eroded the growth outlook here while turning an expected budgetary surplus into a deficit.A supply shock could prove significantly more corrosive.
The result could be a big hit to production, recession and return to 1970s-style stagflation, where high inflation is coupled with low growth. The 1970s were bookended by two energy price shocks linked to global oil supplies but the current crisis has the potential to be bigger and more economically damaging.
This time last year, when energy prices started ticking up, proponents of the stagflation scenario looked like scaremongerers. Fast forward a year and its the regulators and those who predicted inflation would be temporary that look out of step. It’s not obvious that western sanctions are having as damaging an effect on Russia as governments claim.
The rouble’s recent increase in value reflects as much and the latest round of sanctions announced by the US and EU again carefully sidestep an oil and gas embargo, the one area guaranteed to hurt.