Germany issues ‘early warning’ of possible gas shortage as Russia threatens

Moscow said last week that it wanted to pay in rubles rather than US dollars or euros under existing gas supply contracts, and threatened to stop deliveries if this hadn’t happened. The Kremlin’s demand was rejected by Germany and the G7 group of leading developed economies.

On Wednesday, the German government said the country had enough gas for now, but urged all consumers, from businesses to hospitals to households, to cut their use as much as possible with immediate effect.

“There is currently no supply shortage,” Economics Minister Robert Habek said in a statement. “However, we must take additional precautions to be ready for any escalation from Russia.” He added that German gas storage facilities are currently 25% full.

“Early warning” is the first of three levels of warning outlined in Germany’s plan for managing gas supplies in a crisis. If the situation worsens, the government will declare an “alarm” and then an “emergency.” In this state of maximum alert, regulators can ration gas to ensure supplies are provided to “protected customers” such as households and hospitals. Industrial users will be the first to face the cuts.

“It means that industrial production is lost, that supply chains are lost,” Leonhard Birnbaum, chief executive of the German energy group. E.ON (EONGI)This was reported by the public television channel ARD, according to Reuters. “We’re talking about very severe injuries, of course.”
Klaus Müller, head of the German energy market regulator, said on twitter that Wednesday’s warning was intended to avoid a deterioration in gas supplies, but said consumers should be prepared for “all scenarios.”

A panel of experts from the government, regulators, gas network operators and 16 German federal states has been convened to closely monitor the situation and take action “to improve security of supply” if necessary, Habek said.

The European Union depends on Russia for about 40% of its natural gas, and Germany is Moscow’s biggest energy consumer on the continent. EU sanctions imposed on Russia over its invasion of Ukraine include a ban on new investment in energy projects, but do not cover oil and gas exports.

Habek said this week that payment in rubles was unacceptable to Berlin and called Russian President Vladimir Putin’s demand “blackmail”.

Putin has given Russia’s central bank and state gas company Gazprom until Thursday to come up with proposals to accept payments in rubles rather than US dollars or euros as agreed in supply contracts.

With the sanctioned Russian central bank barred from exchanging euros and dollars for rubles, Moscow is trying to find a new stream of cash it can easily spend.

Putin could “directly finance the war, the army, the supply of soldiers, the supply of gasoline for tanks and the production of weapons in his country” with the help of rubles, Khabek said on Monday.

German Chancellor Olaf Scholz had a telephone conversation with Putin on Wednesday, when the German leader stressed that Berlin would only pay for Russian energy in euros or US dollars, according to the German transcript.

Putin told Scholz that he was passing a law that payments for energy supplies from Russia should be made in rubles, but this does not apply to European partners, and payments will continue to be made in euros and transferred to Gazprombank, which is not affected. under sanctions, and then, according to the testimony, they were converted into rubles.

“Chancellor Scholz did not agree with this procedure in conversation, but asked for written information in order to better understand the procedure,” the message says.

The risk of a recession is rising

The European Union is planning reduce consumption of Russian natural gas this year by as much as 66%, as it prepares for complete break with its single largest energy supplier. But it will be difficult for Europe to survive for long without Russian gas, and finding alternative sources is a huge logistical challenge. A recession would be almost guaranteed if Putin cut off supplies.

Leading German economic advisers on Wednesday lowered their forecast for this year’s GDP growth to 1.8% from 4.6% in December, citing inflationary forces and supply chain disruptions caused by the war in Ukraine.

“High dependence on energy supplies from Russia entails a significant risk of lower output and even a recession with significantly higher inflation rates,” the German Council of Economic Experts said in a statement. “Germany must immediately do everything possible to take precautionary measures against the suspension of energy supplies from Russia and quickly end its dependence on Russian energy sources.”

Austria on Wednesday also issued an “early warning” of a possible shortage of natural gas after a government meeting to discuss the crisis.

“We are monitoring the gas market even more closely and are taking precautionary measures to keep our households supplied,” Austrian climate minister Leonora Gewessler tweeted.

The Netherlands, another major consumer of Russian energy in Europe, said it would ask the public to use less natural gas to reduce their dependence on Moscow.

However, the Dutch government will not launch its gas crisis plan, economics ministry spokesman Tim van Dijk told CNN. Instead, he hoped to reduce his consumption of Dutch gas through a campaign directed at his own citizens.

The campaign was developed over several weeks in light of the war in Ukraine and was not launched in response to the German announcement, van Dijk added.

– Charles Riley, Chris Stern, Sugam Pokharel and Benjamin Brown contributed reporting.

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