The German government on Thursday warned of an impending “Lehman Brothers effect” in energy markets if, as feared, Russia completely turns off the Nord Stream 1 Russia-to-Germany gas pipeline—which is already running only at 40% capacity.

The International Energy Agency also this week suggested that a full cutoff of Russian gas supplies to Europe could come as winter approaches, to give Moscow leverage in diplomacy around the war.

Elina Ribakova, the deputy chief economist at the Institute of International Finance (IIF) in Washington, D.C., tweeted Friday morning that Russia’s growing fossil-fuel-derived cash pile is of diminishing use to the Kremlin, because “it has nowhere to spend as imports are collapsing.”

“This is [the] key reason why Gazprom is not bluffing and can disconnect Europe from gas,” wrote Ribakova, who pointed out in a separate thread that the Russian energy giant has already disconnected some countries for failing to pay for their natural gas in rubles.

The economist cited statistical data from the Bank of Finland Institute for Emerging Economies, which on Thursday estimated massive recent drops in exports to Russia—a 64% fall in German exports; French exports down 78%; and so on.

“Notably, exports to Russia also declined among countries not sanctioning Russia, including China and Vietnam. Taiwan and South Korea, major suppliers of semiconductors, have seen a dramatic drop in their exports to Russia that has also caused production problems in Russia,” read a weekly update from the institute.

The Finnish economists noted that the collapse in Russia’s imports had three factors: Western sanctions, problems financing foreign trade transactions, and multinationals abandoning Russia. Also on Thursday, Cisco and Nike became the latest Western corporations to head for the exit.

Meanwhile, the value of Russia’s exports—largely meaning fossil fuels—has risen due to high crude oil and gas prices, and Moscow’s ability to redirect oil sales to China and India in particular.

The result? A Russian current account surplus for the first five months of 2022 that is (at $110 billion) “roughly three and a half times larger than the surplus posted in the same period last year,” the update read.

Despite its cash hoard, Russia is likely heading for its first foreign-debt default in decades, with sanctions blocking its ability to service those debts.

Opposing POV

Not everyone agrees with the notion that Putin’s regime may as well disconnect Europe from its gas supplies because it can’t use the dollars and euros that it already has.

“What’s NOT true is that Putin is cutting gas deliveries as the hard currency he gets is useless,” wrote Robin Brooks—the IIF’s chief economist and thus Ribakova’s boss—in a Tuesday tweet. “Russia imports lots of goods for which it pays with Euros or Dollars.”

Brooks argued that Putin would not be “turning the screws on Europe” if the West was not “reluctant” to sanction the insurance of Russia’s seaborne oil exports. The EU and U.K. are in the process of introducing maritime insurance sanctions, but some in the industry have criticized their vague wording.

“By allowing Putin to export his oil globally, we’re giving him the means to cut gas exports to Europe,” wrote Brooks. “Sanctions on maritime insurance fix this, but the West must be willing to suffer high oil prices temporarily.”

Ribakova, for her part, tweeted that “cutting off Russia for a few weeks from oil with a complete embargo would achieve nothing, but a spike in commodity prices that would hurt global growth.”

Europe’s current scramble to refill its gas storage facilities ahead of the winter “benefits Russia” because of “very elevated prices,” wrote Holger Schmieding, the chief economist at Berenberg Bank, in a Friday note.

However, he also noted that the EU’s success in boosting storage levels “may even be a reason for Russia to curtail supplies now.”

“Otherwise, the EU may need less gas from Russia during the coming winter thanks to ample storage. If so, that could weigh on prices and strengthen the EU’s hand against Russia later this year,” Schmieding wrote.