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Germany warns of gas crisis after Russia cuts supply

Germany warned residents and businesses on Thursday that the country is going through a natural gas crisis that could worsen in the coming months.

“The situation is serious and winter will come,” Robert Habeck, Germany’s economy minister, told reporters at a press conference in Berlin. He said the government had triggered the second stage of its three-stage energy gas plan; the next step would allow the government to begin gas rationing.

“Even if you don’t feel it yet: we are in a gas crisis,” he said. “Gas is now a rare commodity. Prices are already high and we must be prepared for further increases. It will affect industrial production and become a big burden for many consumers.

Last week, Russian energy giant Gazprom cut the amount of natural gas it delivered to Germany by 60%, in what appeared to be the latest move to punish Europe for sanctions. and military support for Ukraine.

Gazprom blamed a turbine at a compressor station for the reductions that was sent to Canada for repair and was not returned due to the sanctions. But Mr Habeck called the Gazprom cuts a deliberate economic attack on Russian President Vladimir V. Putin.

“It’s obviously Putin’s strategy to create insecurity, drive up prices and divide us as a society,” he said.

Recent developments have raised fears that the gas crisis is escalating to dangerous proportions that could have unintended consequences for the wider economy, and that governments are not acting fast enough to stop it.

“We are one step away from gas rationing across Europe, which would impact many sectors, businesses and consumers,” said Biraj Borkhataria, analyst at RBC Capital Markets, an investment bank. Policy makers seem to have found themselves unable to act quickly enough given the speed of events.

Mr Borkhataria said Russia’s actions in Germany could lead to “contagion and ripple effects” across Europe as gas markets are connected. So, for example, restrictions on flows to Germany are likely to affect prices in Great Britain.

Russia is also inflicting financial damage on its corporate clients. One concern is that utilities that have contracts to buy gas from Gazprom will run out of fuel and then have to buy additional supplies at much higher prices to meet their obligations, leading to losses.

“Due to restrictions on the Nord Stream 1 pipeline, only significantly lower quantities of gas currently come from Russia, and replacements can only be purchased on the markets at very high prices,” said Klaus-Dieter Maubach. , chief executive of Uniper, a German utility, in a statement. Uniper said it receives only 30-60% of the requested volumes.

The shortages have pushed gasoline prices to extraordinarily high levels, about six times what they were a year ago. Mr Habeck warned that such high prices forced energy suppliers to bear losses, which could threaten the entire energy market.

“If this minus becomes so big that they can’t take it any longer, the whole market is likely to collapse at some point,” Habeck said, drawing a parallel with how Lehman’s collapse Brothers triggered the global financial crisis.

Mr Maubach hailed the government’s contingency plan as a ‘viable instrument’ to deal with the gas situation for now, but warned that bigger measures would be needed ‘if the supply situation remains like this or get even worse”.

Since late March, when Germany entered the first phase of its plan, the government has focused on increasing its gas storage, which is at more than 58% capacity. But activating stage two of the contingency plan means the government sees a high risk of a long-term supply shortage.

The German government on Wednesday approved a 15 billion euro, or $15.7 billion, credit line for utilities to purchase natural gas to fill storage facilities. In addition, the government plans to launch a program that would help the gas system cope by encouraging companies to temporarily suspend their use of gas. The unused fuel would then be made available to other industrial users at the best price.

But the government decided not to allow gas suppliers to pass on soaring energy costs to customers, after companies opposed the measure.

German companies have been looking for alternative energy sources and ways to save gas, and Mr Habeck said they have been able to cut consumption by around 8% in recent weeks. The government also passed legislation that would allow utilities to restart coal-fired power plants that had been shut down or were due for removal. The Netherlands and Austria have taken similar measures.

Nord Stream 1, the main pipeline supplying Russian gas to Germany, is due for regular maintenance for about two weeks from July 11, when flows will stop, raising fears that Gazprom is not taking advantage of the situation to interrupt deliveries even longer.


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