Influence of reduction of gas supply to economy – case of Slovakia

Thee most discussed problem in most countries is influence of financial and debt crisis on economy. Moreover, in January 2009 led the unsuccessful negotiation about gas price between Russia and Ukraine to suspend gas supply from Russia to east and central European countries. This was the case for Slovak Republic as well. At 6th January 2009 was gas supply from Russia to Slovakia, which is completely dependent on Russian gas, stopped. Slovakia started supplying households and firms from strategic reserves, but biggest gas consumers must work under restricted regime. Principal enterprises reduced or completely stopped their production. The economy of gas-thirsty Slovakia had started to return to its normal pulse on January 19th as the country began receiving deliveries via the Czech Republic, by a route which bypassed Ukraine, allowing restrictions on natural gas use to be lifted. The cut-off gas supply and production lasted 13 days. On January 21st resumed gas supply flow via Ukraine. Estimation of macroeconomic influence of stopped gas supply to national economy will be main objective of this paper.Both long-term and short-term effects will be discussed. This study is based on real situation in east and central European countries, which has been mainly affected by the worsen relations between Russia and Ukraine. Especially, this paper is focused on Slovak economy, which was during this „gas crisis“ completely dependent on Russian gas supply. Study can be discussed and associate to other countries, which could be affected by cut-off gas supply. To quantify the macroeconomic impact of stopped gas supply to economy will be used computational general equilibrium (CGE) model as well as estimation via econometric model and mathematical supply model. The use of different modeling approaches could confirm the rightness of calculations. Our institution has long term experiences with CGE models and mathematical economy. First expectations are losses on production of GDP about 100 mil Eur per day, which means about 0,14 % of GDP growth in long term. The short term outage could be compensated by production increasing in further period and the expected losses are about 1/3 of long term ratio (33-37 mil Eur per day). Long term effects modeled by CGE are divided into the four scenarios and are quantified up to drop of GDP by 20%, drop of production by 25% and unemployment increase to the 20% level. Such a depression is comparable to situation in the beginning of 90ties in 20th century in Slovakia. Fortunately, after 13 days was gas supply recovered. The strong meaning has the attitude of European Union by the negotiation with Russia and Ukraine. The key question for energy policy will by energetic safety of small open countries without main natural resources. The key factor will be diversification of foreign sources and increasing the strategic reserves of natural gas and oil. Secondary, threat for Slovakia represents supply with electric energy as well, because after decreasing the ratio of nuclear energy in Slovakia, raises the amount of energy provided via gas and oil plants. The problem of energy and natural resources strategy is not trivial, and any problem with steady supply could result to significant loses on national economies. Paper is almost finished, bu was not officially published yet. As a result of "gas crisis" there was implemented a pipeline investment project in Slovakia to allow reverse flow from Czcech republic, which was co-financed by EU. Now can be countries supplied from the west in case of unpredictable situation.