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Basf CeO’s bath of realism: “Without Russian gas, the economy will collapse”

For the manager of the chemical giant, the stop to flows would trigger the worst crisis since the second post-war period. And his compatriots wand: they underestimate the link between sanctions and their jobs

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Let’s start with the good news, just to face this April 1st with a lighter heart, which is serving a third watershed deadline that has ended perilously in oblivion. At least in Italy, the last of the EU countries that can afford to underestimate – on the day of the stop to the state of emergency and the formal start of the blackout risk linked to Russian gas payments – the term of the ECB’s Pepp.

world stagflation is assured . The proxies of GDP and inflation at a global level speak for themselves, given the impossibility of a drastic change of gear on the horizon. And the data from the eurozone – first of all + 7.3% of Germany but also 5% of France so far on the edge of the peaks and above all + 9.8% of Spain – clearly tell us that now the ECB will have to do something more serious than inventing a symmetrical 2% target to avoid a drift from the lost Japanese decade. The same goes for the Fed, which has to deal with an inversion on the yield curve that has now also touched the 5-30 year range, effectively opening the way to a market pricing of 9 rate increases for the current year but already three cuts in the two-year period 2023-2024 . In short, chaos. Perhaps central banks need a record-breaking recession to put out the fires of runaway and far from transitory inflation ?

Doubt arises. Above all in light of the continuous US efforts to nip in the bud any prodrome of dialogue or progress that comes from the negotiations , moreover by adding fuel to the fire with the anything but diplomatic statements of President Biden. But in the face of perspectives and hypotheses, we have another certainty. In this case, bad news . The real one. In an interview with the Frankfurter Allgemeine Zeitung , the CeO of the German chemical giant BASF, Martin Brudermuller, trashed any residue of proud political opposition to the Kremlin’s diktats in the energy field, also issuing a very serious warning. Having clearly stated thatindependence from Russian gas will realistically take 4-5 years and that in the meantime US LNG will not temporarily be able to plug the loss at the level of countervalues ​​in the short term , the executive sweeps away any remnants of bellicose rhetoric: Putting the question in terms brutal, a possible stop to supplies from Moscow would drag the German economy into the worst crisis since the Second World War and destroy our prosperity . Especially for many small and medium-sized businesses, this could be the end. We can’t take such a risk!

A bath of realism as raw as necessary, before it’s too late . But that’s not enough. After underlining how a painting like the present one cannot be simplistically painted in shades of white or black , Brudermuller goes into detail, answering a direct question regarding the immediate consequences of a stop to flows linked to the issue of payments in rubles : A block supplies even for a limited period could perhaps paradoxically lead to a forced awareness on both sides, it would oblige all the parties involved to open their eyes. Because such a scenario would immediately clarify the magnitude of consequences. We cannot run out of Russian gas for too long, as this would lead to enormous problems here in Germany. Like BASF, we would have to drastically reduce or perhaps stop production altogether at our main plant in Ludwigshafen , if by chance the supply drops significantly and permanently below 50% of our maximum needs. Not surprisingly, Minister Habeck has already activated the emergency plan .

And if independent sources external to BASF have calculated that a first stop at the Ludwigshafen plant could immediately lead to 40,000 redundancies , the CeO of the chemical giant also calls their compatriots to pragmatism, who – according to him – are dangerously underestimating the consequences what a stop to Russian gas would entail . To be exact, many German citizens I am speaking to have a distorted or completely false conception of the scenario that would arise. This is because people are unaware of the direct connection between boycott through sanctions and the very existence of their workplace . This situation puts our economy and our prosperity at risk .

Finally, the prophecy: What is being created on the market could lead to a dramatic crisis, the consequences of which will be felt more next year and not in the current one. For 2022, in fact, our fertilizer purchases have already been made but in 2023 we will face a lack of supply and the poorest and most fragile countries, especially in Africa, will not be able to guarantee basic products. The real risk is that of famine . In short, is it necessary to drop pants in the face of Russian blackmail? No. But stop with unnecessary penalties and sit at a table, yes. And without wanting to impose conditions halter, since the shoulders already dangerously adjacent to the wall are ours .

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