Germany Triggers Gas ‘Alarm Stage’ Amid Russian ‘Economic Attack’ – National

Germany activated the “alarm stage” of its emergency gas plan on Thursday in response to falling Russian supplies, but stopped short of allowing utilities to pass on rising energy costs to customers in the weakest economy. Europe’s big.

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

The decision is largely symbolic as a way of signaling to businesses and households that painful cuts are ahead. But it marks a major change for Germany, which has cultivated strong energy ties with Moscow since the Cold War.

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Lower gas flows prompted warnings this week that Germany could slip into recession if Russian supplies were to stop altogether. The S&P Global Purchasing Managers’ Index (PMI) showed on Thursday that the economy lost momentum in the second quarter.

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“We must not delude ourselves: the gas supply cut-off is an economic attack on us by (Russian President Vladimir) Putin,” Economy Minister Robert Habeck said in a statement, adding that the Germans would have to reduce consumption.

It is to be hoped that gasoline rationing will be avoided, but it cannot be ruled out, said Habeck, warning:

“From now on, gas is a scarce commodity in Germany… Therefore, we are now obliged to reduce gas consumption, now already in summer.”

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Germany warns of gas rationing if Russia closes taps – 03/30/2022

Russia has denied that the gas supply cuts were premeditated, with state supplier Gazprom blaming the delay in returning repaired equipment caused by Western sanctions. The Kremlin said Thursday that Russia remains a reliable energy supplier and “strictly fulfills all its obligations” to Europe.

Under its Phase 2 plan, Berlin will provide a €15 billion (US$15.76 billion) credit line to fill gas storage facilities and launch a gas auction model this summer to encourage industrial users to save gas.

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The government activates the second “alarm stage” of a three-stage emergency plan when it sees a high risk of long-term supply shortages. It includes a clause that allows utilities to immediately pass on high prices to industry and households and thus help curb demand.

Habeck said Germany was not at that point, but the clause could be triggered if prices continue to rise due to supply shortages, deepening power companies’ losses.

“Every day, every week you do one less. And if this downside gets so big that companies can’t take it anymore and they go bust, the whole market threatens to go down at some point, so a Lehman Brothers effect on the energy system.”

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A move to the next phase has been the subject of speculation since Gazprom cut flows through the Nord Stream 1 pipeline across the Baltic Sea to just 40 percent capacity last week.

Faced with declining deliveries from the main supplier, Russia, Germany has been in Phase 1 of its emergency plan since the end of March, which includes stricter control of daily flows and a focus on filling storage facilities. Of gas.

“The declaration of the alarm stage does not immediately change the fundamental status quo,” said German power provider E.ON. However, it was important that the government was preparing for a significant drop in imports and taking steps to stabilize markets and gas supplies, an emailed statement to Reuters said.

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In the second stage, the market can still function without the need for state intervention that would lead to the final emergency stage.

“The recent reduction in flows to Germany via the Nord Stream1 pipeline, if sustained at these levels, will lead to gas shortages next winter,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Wholesale prices for Dutch gas, the European benchmark, rose as much as 8 percent on Thursday.

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

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

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Several European countries have outlined measures to weather supply shortages and avoid winter power shortages and rising inflation that could test the continent’s resolve to maintain sanctions against Russia.

Supply cuts have also led German companies to contemplate painful output cuts and turn to polluting forms of energy previously thought unthinkable as they adjust to the possibility of running out of Russian gas.

The European Union said on Wednesday it would temporarily turn to coal to plug energy shortfalls, while calling Moscow’s gas supply cuts “rogue moves.”

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

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

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