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

Pipes from the landing facilities of the ‘Nord Stream 1’ gas pipeline are pictured in Lubmin, Germany March 8, 2022. REUTERS/Hannibal Hanschke//File Photo

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  • The West and Russia in an energy stalemate since the invasion of Ukraine
  • German minister warns of ‘difficult road’ ahead
  • Minister does not rule out gasoline rationing
  • The Russian crosses the Nord Stream 1 team on Thursday
  • Risk of total disruption increases: EU’s Timmermans

BERLIN, June 23 (Reuters) – Germany on Thursday triggered the “alarm phase” of its emergency gas plan in response to falling Russian supplies, but did not allow utilities to pass on rising energy costs to customers in Europe’s largest economy.

The measure is the latest escalation in a standoff between Europe and Moscow since Russia’s invasion of Ukraine 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, particularly for Germany, which has cultivated strong energy ties with Moscow since the Cold War.

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Falling gas flows this week triggered warnings that Germany could slide into recession if supplies from Russia cut off completely. S&P Global’s Flash Purchasing Managers’ Index (PMI) showed on Thursday that the economy was losing momentum in the second quarter. Read more

“We should make no mistake: the gas supply cut is an economic attack on us by (Russian President Vladimir) Putin,” Economy Minister Robert Habeck said in a statement, adding that the Germans should reduce their consumption.

“It’s obviously Putin’s strategy to create insecurity, drive up prices and divide us as a society,” he added. “That’s what we’re fighting against.”

Gas rationing would hopefully be avoided, but cannot be ruled out, Habeck said.

Russia has denied the gas supply cuts were premeditated, with state supplier Gazprom (GAZP.MM) accusing a delay in returning serviced equipment caused by Western sanctions.

Under its Phase 2 plan, Berlin will provide a 15 billion euro ($15.76 billion) credit line 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 contingency plan when it sees a high risk of a long-term supply shortage. It theoretically allows utilities to pass on high prices to industry and households and thus contribute to lowering demand. Read more

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

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

RISK OF COMPLETE DISRUPTION

In the second stage, the market is still able to function without the need for state intervention which would trigger the final emergency stage.

“We have already seen serious reductions,” said a gas trader in Europe. “The system is still coping, but there’s not much left,” he said.

The benchmark Dutch wholesale gas contract for July delivery rose 4% to 131.50 euros per megawatt hour (MWh) before settling at 128 euros/MWh at 0835 GMT, still up for the daytime.

Nord Stream 1 is due to undergo maintenance from July 11 to 21 when the streams will stop.

Russia could completely cut off gas to Europe to boost its political influence, the head of the International Energy Agency (IEA) said on Wednesday, adding that Europe must prepare now.

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

Several European countries have outlined measures to weather a supply shortage and avoid winter energy shortages and a spike in inflation that could test the continent’s resolve to maintain sanctions on Russia.

The supply cuts have also prompted German companies to contemplate painful production cuts and resort to polluting forms of energy previously considered unthinkable as they adjust to the prospect of running out of Russian gas. Read more

The European Union announced on Wednesday it would temporarily turn to coal to fill energy shortages, while calling cuts to gas supplies to Moscow a “rogue move”.

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

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

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

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