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

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

  • West, Russia in energy standoff since Ukraine’s invasion
  • German minister warns of ‘rocky road’ ahead
  • Minister does not rule out gas rationing
  • ‘Lehman Brothers’ moment threatens the market
  • Status quo won’t change with alarm stage decision: E.ON

BERLIN, June 23 (Reuters) – Germany launched an “alarm phase” of its emergency gas plan on Thursday in response to falling Russian supplies, but allowing utilities to pass rising energy costs on to customers in Europe’s biggest economy. stopped giving.

The measure is the latest escalation in the standoff between Europe and Moscow since the Russian invasion of Ukraine that has exposed the bloc’s reliance on Russian gas supplies and sparked a frantic search for alternative energy sources.

The move is a largely symbolic gesture for companies and households, but also marks a major turnaround for Germany, which cultivated strong energy ties with Moscow until the Cold War.

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Low gas flows warned this week that Germany could be in the throes of a recession if Russia’s supplies were completely halted. A survey on Thursday showed the economy losing momentum in the second quarter. read more

“Let us not fool ourselves: cutting gas supplies is an economic attack on us by (Russian President Vladimir) Putin,” Economy Minister Robert Habek said in a statement. read more

There is hope that gas rationing will be avoided, but it cannot be ruled out, Hebek said:

“From now on, gas is a rarity in Germany … so now we are obliged to reduce our consumption of gas already in the summer.”

Russia has denied that the supply cuts were intentional, with state supplier Gazprom (GAZP.MM) blaming the delay in the return of serviced equipment due to Western sanctions. The Kremlin said on Thursday that Russia “strictly fulfills all its obligations” to Europe.

Berlin will this summer provide a 15 billion euro ($15.76 billion) line of credit to fill gas storage and launch a gas auction model to encourage industrial users to save gas.

The second “alarm phase” of the three-stage emergency plan means officials see a higher risk of long-term supply shortages. It includes a clause allowing utilities to pass higher prices to industry and households immediately. read more

Habeck said Germany was not there at the time, but could introduce clauses if supply shortages and prices continue to rise, pushing power companies into the red.

“If this minus becomes so large that companies can no longer tolerate it and they drop down, the whole market threatens to collapse at some point – hence a Lehman Brothers effect in the energy system,” he said. . The 2008 collapse of the US investment bank that caused a stir in global financial markets.

Local utility association VKU asked the government to protect consumers from subsidies or risk utilities as low-income retail customers defaulting on payments.

Klaus Mueller, president of the Federal Network Agency, believed that it was possible to triple consumer prices for gas.

“If you extrapolate that, it depends on how you heat, how your building is made, but that could triple the previous gas bill,” he told RTL/NTV broadcasters .

The move to Phase 2 was anticipated as the Gazprom cut flowing into the Baltic Sea via the Nord Stream 1 pipeline last week at only 40% of capacity.

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

Data released Thursday showed Germany imported 22% less natural gas in the first four months of 2022, but increased costs by 170% over the same period.

Facing dwindling deliveries from main supplier Russia, Germany has been on Phase 1 since late March, which includes strict monitoring of daily flows and a focus on filling gas storage facilities.

“The announcement of the alarm phase does not immediately change the fundamental situation,” said German energy provider E.ON (EonGen.de). However, it was important that the government was preparing and taking steps to stabilize the market and gas supply, it said in an emailed statement to Reuters. read more

risk of complete disruption

In the second phase, the market is still able to function without the need for state intervention which will begin in the final emergency phase.

The Nord Stream is due for maintenance on 1 July 11-21 when the flow will stop. Hans Koenig of consultancy Aurora Energy Services in Berlin said Gazprom may have found reasons for pulling off the process.

“Extended maintenance of Nord Stream 1 will further strengthen the market and make it harder to replenish gas storage until winter. This is certainly in Russia’s strategic interest.”

The head of the International Energy Agency (IEA) warned on Wednesday that Russia could cut gas to Europe solely to maximize its political gains, urging Europe to prepare now.

Russian gas flows into Europe through Nord Stream 1 and through Ukraine were stable on Thursday, while reverse flow on the Yamal pipeline intensified, operator data showed.

Dutch wholesale gas prices, the European benchmark, rose up to 8% on Thursday.

Several countries have outlined measures to combat supply shortfalls and stem the rise of winter energy shortages and inflation that could test Europe’s resolve to keep sanctions on Russia.

Supply cuts have prompted German companies to consider painful production cuts and resort to polluting energy sources previously thought unthinkable. read more

The European Union and Norway unveiled a deal on Thursday, allowing the bloc to tap more gas from Western Europe’s largest producer. read more

The EU also hinted at a temporary withdrawal of coal to bridge the gap after the EU called Moscow’s gas supply cuts a “wicked move”.

Its climate policy chief Frans Timmermann said 10 of the 27 EU member states had issued an “early warning” on gas supplies – the first of three crisis levels.

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

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Reporting by Holger Hansen, Christoph Steitz, Christian Kramer, Vera Eckert, Tom Sims, Marva Rashad, Kate Abnett, Nora Bully, Tom Kakenhoff, Paul Carell, Miranda Murray and Riham Alkausa; Writing by Mathias Williams Editing by Tomas Janowski, Elaine Hardcastle

Our Standards: Thomson Reuters Trust Principles.

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