Nobel economist Paul Krugman says Putin's plot to weaponize natural gas prices is a failure, and Russia's superpower status is a facade

Putin's plan to weaponize natural gas prices hasn't worked, Paul Krugman said.
In a column for the NYT, the top economist pointed to Europe's success navigating the last winter.
Russia has slashed its gas supplies in retaliation for Western sanctions.

Putin's plan to weaponize the natural gas market has so far been a failure, and Russia is merely an imitation of a global superpower, according to Nobel laureate Paul Krugman.

In an op-ed for the New York Times on Thursday, Krugman pointed to Russia's efforts to slash its natural gas supplies from global markets, a move that sparked chaos in energy markets last year. In particular, Europe was said to be at major risk of tipping into an energy crisis this winter, with electricity prices notching an all-time high after Russian gas flows were halted on the key Nord Stream 1 pipeline.

But Russia's attempt to hit back at sanctions has largely flopped, Krugman said, as Europe got through last winter just fine. EU nations built up an impressive stockpile of natural gas that went largely unused amid warmer temperatures, and the eurozone avoided a financial catastrophe, managing high inflation without spiking unemployment.

EU gas storages were at 84% capacity at the end of last year, according to Reuters. Meanwhile, the 27-nation bloc currently expects eurozone inflation to ease to 6.9% in March, down from 8.5% in February.

"Europe has weathered the loss of Russian supplies remarkably well," Krugman said, adding that modern economies were far more flexible than initially thought when Russia first waged its energy war with the west. "Democracies are showing, as they have many times in the past, that they are much tougher, much harder to intimidate than they look."

The Kremlin has said the supply cuts are in retaliation for western sanctions, which cut Russia off from the global banking system and majorly restricted its crude oil trade. Europe has weathered Russia's retaliation, while some estimates show Russia's economy is struggling under current trade restrictions.

Russia's energy revenue has crashed 50% from last year, according to estimates from Russia's finance ministry in early 2023, and the country is facing a wider budget deficit as it ramps up spending during its military invasion.

"Russia looks more than ever than a Potemkin superpower, with little behind its impressive facade," Krugman said. "Its role as an energy supplier is proving much harder to weaponize than many imagined."

Other economists have said Russia's economy is set to struggle in the long term. The nation could become a failed state in 10 years, one think-tank estimated, as it faces major headwinds amid its isolation from global markets and declining investment in technology.

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