Russia’s new gas suspension tightens energy screws on Europe

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

FRANKFURT/LONDON, Aug 31 (Reuters) – Russia cut off gas supplies via a major pipeline to Europe on Wednesday, intensifying the economic battle between Moscow and Brussels and raising the prospect of recession and energy rationing in some of the richest countries in the region.

The Nord Stream 1 maintenance shutdown means no gas will be delivered to Germany between 01:00 GMT on August 31 and 01:00 GMT on September 3, according to Russian energy giant Gazprom. (GAZP.MM). Read more

Data from operator Nord Stream 1’s website showed zero streams for 0600-0700 Central European Time (0400-0500 GMT) on Wednesday, the third straight hour with no streams. Read more

European governments fear Moscow will extend the blackout in retaliation for Western sanctions imposed on it after its invasion of Ukraine and have accused Russian President Vladimir Putin of using energy supplies as a “weapon of war”. Moscow denies doing this.

Further restrictions on European gas supplies would deepen an energy crisis that has already driven wholesale gas prices up more than 400% since last August, creating a painful cost of living crisis for consumers and businesses and forcing governments to spend billions to ease the burden. Read more

In Germany, inflation hit its highest level in nearly 50 years in August and consumer confidence is expected to hit a record high for the third consecutive month next month as households brace for higher energy bills. Read more

Unlike last month’s 10-day maintenance for Nord Stream 1, the upcoming work was announced less than two weeks in advance and is being carried out by Gazprom and not Nord Stream AG, focusing on the last turbine in station operation.

Moscow, which reduced supply via Nord Stream 1 to 40% of capacity in June and 20% in July, blames maintenance issues and penalties that prevent equipment from being returned and installed.

Gazprom said the final outage was needed to carry out maintenance on the pipeline’s only remaining compressor.

Yet Russia has also completely cut off supplies to Bulgaria, Denmark, Finland, the Netherlands and Poland, and reduced flows through other pipelines since launching what Moscow calls its ” special military operation” in Ukraine. Read more

Gazprom is just using an excuse to cut off natural gas deliveries to its French subcontractor, the energy minister said in Paris over a separate dispute over payments, but added the country had anticipated the loss supply.

‘ELEMENT OF SURPRISE’

German Economy Minister Robert Habeck, on a mission to replace Russian gas imports by mid-2024, said earlier this month that Nord Stream was “fully operational” and that it would not there was no technical problem as claimed by Moscow.

Klaus Mueller, chairman of the German grid regulator, said a resumption of flows would help Germany’s security of supply, but no one was able to say what the consequences would be if flows remained at zero. Read more

Europe’s biggest economy is making better-than-expected progress in filling up its gas storage facilities, but that’s not enough to get the country through the winter, he said.

Reduced flows via Nord Stream have complicated efforts across Europe to fill vital gas storage facilities, a key strategic objective to get through the winter months, when governments fear Russia could shut down completely. flows.

“It is a bit of a miracle that gas fill levels in Germany have continued to rise,” the Commerzbank analysts wrote, adding that Germany had so far managed to buy sufficient volumes at prices higher elsewhere.

In the meantime, however, some Europeans are voluntarily reducing their energy consumption, including limiting their use of electrical appliances and showers at work to save money as businesses prepare for possible rationing. Read more

At 83.26%, Germany is already within reach of an 85% target for its national gas storage tanks by October 1, but it has warned that reaching 95% by November 1 would be exaggerated unless businesses and households drastically reduce their consumption.

For the European Union as a whole, the current storage level is 79.94%, just short of a target of 80% by October 1, when the continent’s heating season begins.

Goldman Sachs analysts said their baseline assumption was that this outage would not be extended.

“If this were the case, there would be no more element of surprise and reduced revenue, while low flows (Nord Stream 1) and the occasional drop to zero have the potential to keep the market volatile. and political pressure on Europe at a higher level,” they said.

Reporting Nina Chestney and Christoph Steitz; Additional reporting by Matthias Inverardi, Bharat Govind Gautam and Eileen Soreng; Editing by Veronica Brown, Carmel Crimmins and Lincoln Feast.

Our standards: The Thomson Reuters Trust Principles.