Germany triggers gas alarm stage, accuses Russia of ‘economic attack’

Pipes at the landfall facility of the ‘Nord Stream 1’ gas pipeline are shown in Lubmin, Germany, March 8, 2022. REUTERS/Hannibal Hanschke//File photo

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  • The West and Russia in an energy confrontation since the invasion of Ukraine
  • German minister warns of ‘rocky road’ ahead
  • Minister does not rule out gasoline rationing
  • Russian flows through stable Nord Stream 1 on Thursday
  • The risk of total disruption is growing: the Timmermans of the EU

BERLIN, June 23 (Reuters) – Germany activated the “alarm stage” of its emergency gas plan on Thursday in response to falling Russian supplies, but stopped short of allowing utilities to pass on rising costs. energy to customers in Europe’s largest economy.

The move is the latest escalation in a standoff between Europe and Moscow since Russia’s invasion of Ukraine that has exposed the bloc’s dependence on Russian gas supplies and sparked a frantic search for alternative energy sources.

The decision, announced by the economy minister, marks a sea change especially for Germany, which has cultivated strong energy ties with Moscow since the Cold War.

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Lower gas flows prompted warnings this week that Germany could slide into a recession if supplies from Russia were to stop altogether. The S&P Global Purchasing Managers’ Index (PMI) showed on Thursday that the economy lost momentum in the second quarter. read more

“We must not delude ourselves: the gas supply cut-off is an economic attack on us by (Russian President Vladimir) Putin,” Economy Minister Robert Habeck said in a statement, adding that the Germans would have to reduce consumption.

“Obviously Putin’s strategy is to create insecurity, raise prices and divide us as a society,” he added. “This is what we are fighting against.”

It is to be hoped that gasoline rationing will be avoided, but it cannot be ruled out, Habeck said.

Russia has denied that the gas supply cuts were premeditated, with state supplier Gazprom (GAZP.MM) blaming a delay in the return of repaired equipment caused by Western sanctions.

Under its Phase 2 plan, Berlin will provide a 15 billion euro ($15.76 billion) line of credit to fill gas storage facilities. In addition, a gas auction model will be launched this summer to encourage industrial gas consumers to save gas.

The government activates the second “alarm stage” of a three-stage emergency plan when it sees a high risk of long-term supply shortages. In theory, it allows utilities to pass on high prices to industry and households and thus helps reduce demand. read more

A move to the next phase has been the subject of speculation since Gazprom cut flows through the Nord Stream 1 pipeline across the Baltic Sea to just 40% capacity last week.

Faced with the decrease in gas flows from the main supplier Russia, Germany has been in Phase 1 of its emergency plan since the end of March, which includes stricter control of daily flows and a focus on filling gas facilities. gas storage.

TOTAL DISRUPTION RISK

In the second stage, the market can still function without the need for state intervention that would lead to the final emergency stage.

“We have already seen some serious cuts,” said a gas trader in Europe. “The system is still coping, but there isn’t much left,” he said.

The benchmark Dutch wholesale gas contract for July delivery rose as much as 4% to €131.50 per megawatt-hour (MWh) before settling at €128/MWh at 08:35 GMT, still in effect for the day. .

Nord Stream 1 will undergo maintenance from July 11 to July 21, when flows will stop.

Russia could cut off gas to Europe entirely to bolster its political clout, the head of the International Energy Agency (IEA) said on Wednesday, adding that Europe needed to prepare now.

Russian gas flows to Europe via Nord Stream 1 and through Ukraine were stable on Thursday, while reverse flows on the Yamal pipeline increased, operator data showed.

Several European countries have outlined measures to weather supply shortages and avoid winter power shortages and rising inflation that could test the continent’s resolve to maintain sanctions against Russia.

Supply cuts have also led German companies to contemplate painful output cuts and turn to polluting forms of energy previously thought unthinkable as they adjust to the possibility of running out of Russian gas. read more

The European Union said on Wednesday it would temporarily turn to coal to cover energy shortfalls, while describing gas supply cuts from Moscow as “rogue moves”.

The bloc’s climate policy chief, Frans Timmermans, said on Thursday that 10 of the 27 EU member countries have issued an “early warning” on gas supplies, the first and least serious of the three levels of crisis identified. in EU energy security rules.

“The risk of a complete gas outage is now more real than ever,” he said.

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Information from Holger Hansen, Christian Kraemer, Vera Eckert, Marwa Rashad, Kate Abnett, Nora Buli; written by Matthias Williams Edited by Tomasz Janowski

Our standards: The Thomson Reuters Trust Principles.

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