Germany triggers gas alert, accuses Russia of “economic attack”.

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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

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  • West, Russia since the invasion of Ukraine in the energy patch
  • Federal minister warns of “rocky road”.
  • Minister does not rule out gas rationing
  • Russian flows steadily through Nord Stream 1 on Thursday
  • Risk of complete disruption growing: Timmermans of the EU

BERLIN, June 23 (Reuters) – Germany on Thursday put its emergency gas plan on “alert” in response to falling Russian supplies, but has been reluctant to allow utilities to pass on rising energy costs to customers in Europe’s largest economy .

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

The decision announced by the Economics Minister marks a significant turning point, particularly for Germany, which has maintained strong energy ties with Moscow since the Cold War.

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Lower gas flows sparked warnings this week that Germany could fall into recession if Russia cuts supplies altogether. S&P Global’s flash purchasing managers’ index (PMI) on Thursday showed the economy was losing momentum in the second quarter. Continue reading

“Let us not delude ourselves: cutting gas supplies is an economic attack on us by (Russian President Vladimir) Putin,” Economy Minister Robert Habeck said in a statement, adding that Germans need to cut consumption.

“It’s obviously Putin’s strategy to create insecurity, inflate prices and divide us as a society,” he added. “We fight against that.”

Gas rationing will hopefully be avoided, but cannot be ruled out, said Habeck.

Russia has denied the gas supply cuts were premeditated, with state supplier Gazprom (GAZP.MM) blaming a delay in returning serviced equipment caused by Western sanctions.

As part of its Phase 2 plan, Berlin is providing a €15 billion ($15.76 billion) credit line to fill gas storage facilities. In addition, a gas auction model will be launched this summer to encourage industrial gas consumers to save gas.

The government activates the second “alert level” of a three-stage contingency plan when it sees a high risk of long-term supply shortages. In theory, it allows utilities to pass on high prices to industry and households, thereby helping to reduce demand. Continue reading

A transition to the next phase has been the subject of speculation since Gazprom reduced inflows via the Nord Stream 1 pipeline through the Baltic Sea to just 40% of capacity last week.

Faced with dwindling gas flows from key supplier Russia, Germany has been in phase 1 of its contingency plan since late March, which includes tighter monitoring of daily flows and a focus on gas storage tank filling.

RISK OF COMPLETE INTERRUPTION

In the second phase, the market is still functional without the need for state intervention, which would occur in the last emergency phase.

“We’ve already seen some serious cuts,” said a gas trader in Europe. “The system is still coping, but there isn’t much left,” he said.

The benchmark Dutch gas wholesale contract for July delivery rose as much as 4% to 131.50 euros per megawatt-hour (MWh) before settling at 128 euros/MWh by 08:35 GMT, still at the daily rate.

Nord Stream 1 is scheduled for maintenance July 11-21, when flow will be halted.

Russia could shut off gas to Europe entirely to boost its political clout, the head of the International Energy Agency (IEA) said on Wednesday, adding that Europe must prepare now.

Russian gas flows to Europe via Nord Stream 1 and through Ukraine were stable on Thursday, while backflows in the Yamal pipeline increased, operator data showed.

Several European countries have outlined measures to withstand a supply shortage and stave off winter energy shortages and a surge in inflation that could test the continent’s resolve to maintain sanctions on Russia.

The supply cuts have also prompted German companies to consider painful production cuts and resort to polluting forms of energy previously thought unthinkable while adjusting to the prospect of running out of Russian gas. Continue reading

The European Union on Wednesday signaled it would temporarily turn to coal to ease energy shortages, calling gas supply cuts in Moscow a “rogue”.

The bloc’s climate policy chief, Frans Timmermans, said Thursday that 10 of the EU’s 27 member countries have issued an “early warning” on gas supplies — the first and least severe of three levels of crisis identified in EU energy security rules.

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

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Reporting by Holger Hansen, Christian Kraemer, Vera Eckert, Marwa Rashad, Kate Abnett, Nora Buli; Writing by Matthias Williams Edited by Tomasz Janowski

Our standards: The Thomson Reuters Trust Principles.

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