Last year, the pipeline delivered about 35% of total Russian gas imports to Europe. But
since June, Gazprom
had reduced flows along Nord Stream 1 to just 20% of its capacity
citing maintenance issues and a dispute over a missing turbine caught in Western export sanctions.
Moscow’s decision not to reopen the pipeline on Saturday fueled concerns that the European Union could run out of gas this winter, despite a successful effort to fill storage tanks. Similar fears in the UK sent wholesale natural gas futures up more than a third on Monday.
News of Friday’s indefinite pipeline shutdown sent the euro plummeting
Monday — it’s lowest level for 20 years
. The pound hit $1.14, its lowest since 1985, as traders worried about the toll a potentially drastic energy shortage could take
on regional economic activity and government budgets.
Some countries are preparing to spend big to try to limit the pain.
On Sunday, the German government announced a 65 billion euro ($64 billion) relief package to help households and businesses cope with soaring inflation. Germany
Europe’s largest economy, is particularly dependent on gas exports from Russia
to power its homes and heavy industry.
Together with the previous measures, this brings the total amount of government support to 95 billion euros ($64 billion), or about 2.5% of German GDP, Holger Schmieding, chief economist at Berenberg, said in a note. of Monday.
Liz Truss, who goes succeed Boris Johnson
as UK Prime Minister this week, is under huge pressure to announce more aid to households and businesses energy bills are skyrocketing
According to a report by The Sunday Times
who cited unnamed sources within the country’s finance department.
If so, it would exceed the country cost pandemic leave plan
in which the government subsidized workers’ wages to prevent mass layoffs, by around £30 billion ($34 billion).
Prepare for winter
For months, the European Union has been strengthening its energy reserves
for the colder months, when consumption increases, as it fears that Russia will further reduce its gas supply.
Already, Moscow has stopped sending gas to several “unfriendly” European countries and energy companies because of their refusal to pay for gas in rubles, as the Kremlin insists, rather than the euros or dollars indicated in the contracts.
Friday’s Nord Stream 1 announcement came just hours after G7 countries have agreed to cap the price at which Russia can sell its oil
in an effort to limit the revenue the Kremlin uses to fund its war in Ukraine.
A spokesperson for Siemens (GCTAF)
the German manufacturer of the allegedly faulty Nord Stream 1 turbine said on Friday that an oil leak was not “a technical reason to stop operation”.
“Regardless of this, we have already repeatedly emphasized that there are enough additional turbines available at the Portovaya Compressor Station to keep Nord Stream 1 running,” the spokesperson told CNN Business.
As the energy stalemate intensified, EU countries quickly filled their gas storage facilities. Stores are now filled to 82% capacity, according to data from Gas Infrastructure Europe – exceeding the 80% target authorities set for countries before November.
“Despite a serious risk of energy shortages, we still expect most of Europe to get through the cold season without having to shut down significant parts of industry through large-scale rationing of supply. in gas,” Schmieding said in his memo.
European leaders know, however, that they must do more to avoid widespread difficulties and limit the fallout from a recession. EU energy ministers
hold an emergency meeting
Friday to discuss plans to shield Europeans from the worst of energy price hikes.
Initial ideas include a mechanism that decouples electricity prices from wholesale natural gas prices and an emergency credit offer for energy companies at risk of bankruptcy, according to draft documents seen by Reuters