[CHAOS]

[b]Expected Consequences[/b]

A reduction in Russian energy supplies — ideally, a complete halt of such supplies — would lead to disastrous outcomes for German industry. The need to divert significant amounts of Russian gas for winter heating of residential and public facilities will further exacerbate the shortages. Lockdowns in industrial enterprises will cause shortages of components and spare parts for manufacturing, a breakdown of logistics chais, and, eventually, a domino effect. A complete standstill at the largest chemical, metallurgical, and machine-building, plants is likely, while they have virtually no spare capacity to reduce energy consumption. It could lead to the shutting down of continuous-cycle enterprises, which could mean their destruction.

The cumulative losses of the German economy can be estimated only approximately. Even if the restriction of Russian supplies is limited to 2022, its consequence will last for several years, and the total losses could reach 200-300 billion euros. Not only will it deliver a devastating blow to the German economy, but the entire EU economy will inevitably collapse. We are talking not about a decline in economy growth pace, but about a sustained recession and a decline in GDP only in material production by 3-4% per year for the next 5-6 years. Such a fall will inevitably cause panic in the financial markets and may bring them to a collapse.

The euro will inevitably, and most likely irreversibly, fall below the dollar. A sharp fall of euro will consequently cause its global sale. It will become a toxic currency, and all countries in the world will rapidly reduce its share in their forex reserves. This gap will be primarily filled with dollar and yuan.

Another inevitable consequence of a prolonged economic recession will be a sharp drop in living standards and rising unemployment (up to 200,000-400,000 in Germany alone), which will entail the exodus of skilled labour and well-educated young people. There are literally no other destinations for such immigration other than the United States today. A somewhat smaller, but also quite significant flow of migrants can be expected from other EU countries.

The scenario under consideration will thus serve to strengthen the national financial conditions both indirectly and most directly. In the short term, it will reverse the trend of the looming economic recession and, in addition, consolidate American society by distracting it from immediate economic concerns. This, in turn, will reduce electoral risks.

In the medium terms (4-5 years), the cumulative benefits of capital flight, re-oriented logistical flows and reduced competition in major industries may amount to USD 7-9 trillion.

Unfortunately, China is also expected to benefit over the medium term from this emerging scenario. At the same time, Europe’s deep political dependence on the U.S. allows us to effectively neutralise possible attempts by individual European states to draw closer to China.