How would an energy embargo affect Germany’s economy?

RUSSIA’S DECISIONHEC to halt the supply of gas to Bulgaria and Poland has added fuel to an already heated debate in Germany, which is heavily reliant on the commodity. For weeks the country’s economists and officials have argued over just how much a ban on Russian hydrocarbons would harm the economy. Now it seems imaginable that Russia itself could turn off the taps. What toll would an embargo take? A wide body of research, which examines a range of past disruptions, sheds light on the question.The relationships between modern firms are not simple links connecting one producer with another, but a tangle of complex interactions. The breakdown of a seemingly insignificant link in the chain can disrupt firms that are either upstream or downstream of it, causing wider damage. In a paper published in 2019 David Baqaee of the University of California, Los Angeles, and Emmanuel Farhi of Harvard University used a model of complex supply networks to study the oil shocks of the 1970s. Linkages between firms and sectors meant that the overall economic effect was quite a bit larger than the direct impact on sectors that used oil. Recent research on the effect of social distancing on America by Jean-Noël Barrot, then of Paris, and his co-authors finds that ripple effects through production networks accounted for more than half of the total economic impact.