EU leaders are bracing for a gas supply shortage that could freeze entire sectors of the bloc’s economy as fears grow that a major pipeline carrying Russian gas to Europe will be shut down for good.
The scenario of rich European countries having to ration their energy consumption – and decide to shut down major industries – loomed closer Monday as the flow of natural gas to Europe via the Nord Stream pipeline dropped to zero.
The shutdown was part of a planned 10-day hiatus, but analysts and officials worry that Russia’s Gazprom, which has already cut or restricted gas supplies to 12 EU countries, could choose not to close the Nord Stream pipeline. reactivate when maintenance work is over .
Such a move would send an economy like Germany’s further into crisis, with officials in Berlin warning that energy-intensive industries could be paid to cut consumption in what German Vice-Chancellor Robert Habeck called a “political nightmare scenario” on Sunday. called.
All eyes are on Nord Stream for now.
“What happens after the maintenance? What does it come back to later? That’s what everyone will follow,” said Ed Cox, head of Global Liquefied Natural Gas (LNG) at commodity intelligence firm ICIS.
Some analysts argue that Russia is unlikely to reopen the pipeline and would find excuses to keep it quiet after the 10-day maintenance shutdown.
This scenario is “quite likely,” said Alexander Gabuev, a senior fellow at the Carnegie Endowment for International Peace in Washington, arguing that a complete cessation of gas supplies to Europe was a key tool in Russian President Vladimir Putin’s arsenal. to divide Europe over Ukraine for the winter, when the worst effects of a gas shortage would be felt.
“Gabuev is clearly the card the Kremlin has,” Gabuev said.
French finance minister Bruno Le Maire expressed those fears on Sunday, saying that a total shutdown of Russian gas to Europe was “the most likely option” and that countries “must get ourselves in line from now on”.
On July 20, EU officials in Brussels will publish a winter preparation plan that will seek to ensure countries have enough gas to get through the winter. But details of the plan are so far vague.
“The situation is clearly serious and we must be adequately prepared for any eventuality,” a European Commission spokesman said on Monday.
Other options under consideration include bailouts for power companies, states taking control of power plants, and gas rationing for industry.
Gas Brinkmanship
The state of alarm in Paris and Berlin is a far cry from the more optimistic mood in Brussels three months ago, when top officials announced a coordinated move away from Russian gas and a goal to cut dependency by two-thirds this year.
“It’s not easy, but it’s achievable,” said Frans Timmermans, Executive Vice President of the European Commission at the time.
The EU has already missed that lofty goal – by June 16, it had already imported more Russian gas than it budgeted for the year. That is even taking into account the fact that Moscow is suspending deliveries to some EU countries and delaying deliveries to others.
For now, European gas traders are holding their breath as Nord Stream is shut down for its annual audit.
Panic flared briefly on Monday when Italy’s major energy company Eni said supplies from Gazprom had fallen from 32 million cubic meters per day to 21 million.
But the reduced supply was related to the shutdown of Nord Stream and not, as some had feared, an additional reduction in Russian flows through other pipelines crossing Ukraine or through the Turkstream pipeline branch, which runs through Bulgaria.
Still, in recent years, Russia has compensated for the reduced supply during Nord Stream’s maintenance by diverting more gas through other routes. This year it hasn’t — at least so far.
As the invasion of Ukraine progresses, Russia is already using energy supplies as a bargaining chip to break western unity and lift sanctions against Moscow.
On Friday, Kremlin spokesman Dmitry Peskov dangled the possibility of “pushing up” gas volumes through Nord Stream from July 21, but only if Canada allows the return of a gas turbine critical to the operation of Nord Stream, which is currently in operation. repair is in Montreal.
In an email to POLITICO, Canada’s Department of Natural Resources confirmed that the country would release a total of six turbines to Nord Stream through a one-time sanctions exception.
Berlin and the US cheered, but Kiev was furious after he self-motivated Ottawa not to return the parts.
“The decision on the exception to sanctions will be seen in Moscow solely as an expression of weakness,” Ukrainian President Volodymyr Zelenskyy said on Monday. “There is no doubt that Russia will try not only to limit it as much as possible, but to completely stop supplying gas to Europe at the most acute moment. This is what we need to prepare for now, this is what is being provoked now.”
‘Shower shorter, less heat’
If Moscow’s Nord Stream doesn’t restart, European options for getting an alternative gas supply will be limited.
Earlier this year, liquefied natural gas entering the EU – mainly from the US – reached record levels. But the explosion and disruption in June at a major Texas export facility jeopardized the bloc’s plans to rely on the Americans, at least for the rest of this year.
Gulf countries have offered to ramp up production, but these proposals come with political commitments, such as Oman’s request for visa-free travel in the EU for its citizens.
“We are in a situation where there are limits to how many other gas sources you can get into Europe and there are limits to what LNG can do,” said Tom Marzec-Manser, ICIS’s chief of gas. “We are well above those limits.”
Gas through pipelines from regional neighbors such as Azerbaijan and Norway has increased, and this month Oslo approved a production increase to support exports. But the Norwegian government warned that “companies on the Norwegian shelf are now producing at their maximum level, or very close to this level.”
The Netherlands announced that so far this year it has already managed to reduce energy consumption by a third, potentially allowing some extra gas to be diverted to the neighbours. But Dutch Climate Minister Rob Jetten warned that ramping up the earthquake-prone Groningen field, Europe’s largest, to save the day would be a “last resort”.
Fatih Birol, director of the International Energy Agency, described the situation bluntly earlier this year: “Either governments or utilities will have to ration themselves – reduce energy to consumers – or we will do it ourselves, by pushing the energy-saving button. pressing efficiency. †
EU countries will have to cut demand by 15 percent over the next 10 months if Russia cuts off all gas supplies, according to an analysis by think tank Bruegel. In the Baltic States and in Finland, governments may have to make cuts of up to 54 percent.
As the mood darkens, leaders and executives are publicly calling for rationing that would have been unthinkable a few months ago.
In France, the CEOs of three of the country’s largest energy companies begged people to save energy in a joint opinion.
Dutch politicians have urged citizens to take shorter showers and reduce heating to beat the crunch.
Local authorities in Germany are resorting to measures including dimming street lights and lowering temperatures in outdoor swimming pools after the country activated a phase two emergency warning last month.
And while EU lawmakers have welcomed progress on new mandatory gas supply regulations that would require storage to be 80 percent filled by November, negotiators are still fiercely arguing over who will pay for the gas — and who, in the event takes priority in an emergency.
According to real-time data, the current storage level is 61.6 percent.
When the block’s storage is full, it can hold about a fifth of annual consumption, but the facilities are not designed to be reduced to zero and are unevenly distributed across the continent, making equal access in a crisis anything but certain.
Looking for No. 1
So far, at least 10 EU countries have activated the first “early warning” phase of their emergency plans, which Brussels members must have in place since 2017.
Germany, which is heavily dependent on Russian gas, is the only country to initiate the second phase. By triggering the third phase, Berlin could intervene in the market and become the national energy supply coordinator, determining which sectors will be cut off first.
In such a scenario, politicians would likely start cutting off non-essential sectors like the automotive sector, followed by industries other than social services and finally home heating, according to Simone Tagliapietra, senior energy analyst at the think tank Bruegel.
On Monday, Germany and the Czech Republic jointly pledged to “stand united to provide operational cooperation and coordination in the event of a complete disruption of gas supplies that could occur in the coming weeks”.
But many fear an every-for-himself scenario where countries keep gas within their own borders.
That is why the European Commission is encouraging countries to set up voluntary cross-border ‘solidarity agreements’ to share gas in times of need.
Only six such agreements have been made so far and “the problem is that may not be strong enough,” Tagliapietra said, as these bilateral agreements do not have an enforcement mechanism.
Source: Politics
