Europe plans to force countries to ration gas as Russia arms energy

Announced on Wednesday, the Save Gas for a Safe Winter plan sets a goal for 27 Member States to reduce their gas consumption by 15% between August and March next year. This reduction is based on countries’ average gas consumption for the same months over the previous five years.

The plan aims to reduce demand from businesses and public buildings rather than private homes. Among the measures proposed, the EU Commission encourages the transition of industry to alternative energy sources, including coal where necessary, and the introduction of an auction system that compensates companies for reduced gas consumption.

The commission also hopes to pass new legislation that would give it the power to force states to reduce gas demand “when there is a substantial risk of severe gas shortages or exceptionally high gas demand,” the press release said. release.

By September, countries will have to update their national gas reduction plans to show how they can meet the new target.

The measures come just a day before officials fear that Gazprom, Russia’s state gas company, could refuse to resume supplies via Nord Stream 1 pipeline. Nord Stream 1 has been shut down over the past 10 days for scheduled maintenance.

European Commission President Ursula von der Leyen said on Wednesday that a total shutdown of Russian gas supplies was a “likely scenario”.

“Russia is blackmailing us. Russia is using energy as a weapon,” she said at a press conference on the new plan.

The pipeline is a vital artery connecting Huge gas reserves in Russia to the continent via Germany. It supplies 55 billion cubic meters of gas per year, or almost 40% of the block’s total pipeline imports from Russia.

Gazprom cut pipeline flows by 60% last month, blaming the West’s decision to suspend vital turbines because of sanctions against Russia over its invasion of Ukraine.

Those turbines have since been allowed to travel to Germany from Canada, where they have been refurbished, in line with the waiver of sanctions, the Canadian government said last week.

But Russia may still decide to keep the taps turned off. The country has already cut off gas supplies to several European countries and energy companies because they refused Russian demands to pay for gas in rubles — a move that would violate European sanctions.
On Tuesday, Russian President Vladimir Putin said during a visit to Iran that Gazprom would “fulfill all its obligations” to supply gas to Europe, but warned that supplies could be cut by 20% next week if it did not receive a turbine. report from The Wall Street Journal.
Gazprom confirmed on Wednesday tweet that it has not yet received the necessary documentation from Siemens, the turbine manufacturer, for its delivery to Russia.

Siemens told CNN that they would not comment on Gazprom’s claims.

According to the Intercontinental Exchange, continued uncertainty over gas supplies to Europe has led to an increase in underlying gas prices by about 85% since the invasion at the end of February.

On Wednesday, prices rose 5% to 161 euros ($165). per megawatt-hour as the deadline for opening the pipeline approaches.

Germany in danger

Germany will be especially vulnerable due to cuts in gas supplies. The region’s largest economy has have long relied on Russian gas to power their homes and heavy industry.
In June, the country activated a second three-stage emergency gas rationing program days after Russia cut gas flows through the Nord Stream 1 gas pipeline. While it has been able to reduce Russia’s share of its imports from 55% to 35% since the start of the war, the drastic cut could severely limit its ability to replenish its gas reserves before the winter, as well as plunge the country into crisis. recession.

On Monday, German gas distribution company Uniper drew on a €2bn ($2.05bn) credit line at KfW bank due to the impact of disruptions in Russian gas supplies.

German Economy Minister Robert Habeck said earlier this month that the country should “prepare for the worst” on Thursday, when the pipeline is due to resume operations.

According to Gas Infrastructure Europe, the level of gas storage in the European Union is currently approaching 65%.

That’s a lot more than the same time last year, but still a long way from the 80% target the bloc set for its member states to reach by November, Henning Gloishtein, director of energy, climate and resources in the Eurasia Group.

“If a [Nord Stream 1] remains switched off or only partially returned after maintenance, it will be difficult for Germany and the entire EU to achieve this goal, hence the possibility of further policy measures to reduce gas use,” said Gloystein.

“Dangerous situation

The block aims for safe alternative gas sources to avoid a potentially catastrophic shortage this winter. But the crisis could come sooner than expected, depending on Russia’s next move.

The International Monetary Fund said on Tuesday that a total shutdown of Russian gas supplies could cut the GDP of Hungary, Slovakia and the Czech Republic – countries particularly dependent on Moscow’s exports – by as much as 6%.

“As summer approaches, and then autumn, it gets closer and closer to the moment when the crisis will come, and it is more and more a question of “when” and not “if” the crisis will come,” Vladimir Petrov, senior energy commissioner. This was stated by an analyst at Rystad Energy.

Fatih Birol, chief executive of the International Energy Agency, described the situation in Europe as “dangerous” and said the country must prepare for a “long and harsh winter.”

According to the IEA, even if European countries manage to fill their gas storage facilities by 90%, there could still be supply disruptions early next year if Russia decides to stop gas supplies from October.

Earlier this week, the agency said Europe must find ways to save 12 billion cubic meters of gas, about 3% of its annual consumption, over the next 12 weeks to avert disaster. It outlines a number of steps countries can take, including burning more coal and oil.

“This is a big request, but it does not overstate the scope of what is needed,” Birol said in a press statement on Monday.

“It is absolutely not enough to simply rely on gas from non-Russian sources – these supplies simply do not exist in the volumes necessary to make up for the missing supplies from Russia,” he added.

Mark Thompson and Nadine Schmidt contributed reporting.

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