Europe plans to force countries to distribute gas as Russia weaponizes energy

The “Save Gas for a Safe Winter” plan announced on Wednesday sets a target for the 27 member states to reduce their gas demand by 15% between August and March next year. after. That reduction is based on the countries’ average gas consumption for the same month over the previous five years.

The plan focuses on reducing the need for businesses and in public buildings, rather than private homes. Among the proposed measures, the EU Commission is encouraging the industry to switch to alternative energy sources – including coal where needed – and introducing auction systems to compensate companies. reduce their gas consumption.

The commission is also hoping to pass a new law that would potentially force states to reduce gas demand “when there is a significant risk of severe gas shortages or particularly high gas demand.” the press said. release.

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

The measures come just a day before officials fear Gazprom, Russia’s state-owned gas company, may refuse to restart deliveries through Nord Stream 1 . pipeline. Nord Stream 1 has been down for the past 10 days for routine maintenance.

EU Commission President Ursula von der Leyen said on Wednesday that a complete shutdown of Russian gas is a “probable scenario.”

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

Pipeline is an important lifeline link Russia’s huge gas reserves to the continent via Germany. It supplies 55 billion cubic meters of gas per year, or nearly 40% of the bloc’s total pipeline imports from Russia.

Last month, Gazprom cut flow through the pipeline by 60%, blaming the West’s decision to withhold vital turbines because of sanctions against Russia over its invasion of Ukraine.

Pipeline and switchgear systems at the Nord Stream 1 Baltic Sea pipeline gas receiving station and OPAL transit station (Ostsee-Pipeline-Anbindungsleitung) on ​​July 11, 2022, in Mecklenburg, Western Pomerania, Lubmin, Germany.

Last week, the Canadian government said the turbines had been allowed to travel to Germany from Canada, where they were being repaired, under a sanctions waiver.

But Russia can still decide to turn off the faucet. This country has stopped supplying gas to some European countries and energy companies, because they refused Russia’s request to pay for gas in rubles – a move that could expose them to European sanctions.
On Tuesday, Russian President Vladimir Putin said during a visit to Iran that Gazprom would “fully fulfill its obligations” in supplying gas to Europe. But he warned deliveries could drop by 20% next week if it doesn’t receive turbines, according to a report of The Wall Street Journal.
Gazprom confirmed on Wednesday tweet that they have not yet received the necessary documents from Siemens, the turbine manufacturer, to authorize its delivery to Russia.

Siemens told CNN it would not comment on Gazprom’s statements.

Continued uncertainty over European gas supplies has pushed benchmark gas prices up about 85% since the invasion in late February, according to the Intercontinental Exchange.

On Wednesday, the price jumped 5% to €161 ($165) per megawatt-hour as the pipeline’s reopening deadline is inching closer.

Germany is at risk

Germany will be particularly vulnerable to reduced gas supplies. The region’s largest economy has long time dependent on Russian gas to power homes and heavy industry.
In June, the country activated the second of three stages of emergency gas distribution program a few days after Russia reduced flows through the Nord Stream 1 pipeline. Although they have tried to cut the share of Russian imports from 55% to 35% since the beginning of the war, the Substantial cuts could severely limit its ability to fill its gas reserves before winter, as well as push the country into a Depression.

Struggling German gas distributor Uniper on Monday withdrew a 2 billion euro ($2.05 billion) line of credit with bank KfW due to the effects of disruptions to its gas supplies. Russia.

Robert Habeck, Germany’s Economy Minister, earlier this month said the country must “prepare for the worst” on Thursday, when the pipeline is scheduled to resume operation.

According to the European Gas Infrastructure Agency, the level of gas reserves across the European Union is now close to 65%.

That number is more than at the same time last year, but still far from the 80% target the bloc set for member states in November, Henning Gloystein, director of energy, climate and resources at Eurasia Group, told CNN Business.

“If [Nord Stream 1] Mr Gloystein said that had not yet been achieved or only partially returned after the maintenance, it would be difficult for Germany and the EU as a whole to achieve that goal, so there was the possibility of further political measures to cut back use gas.

A ‘dangerous’ situation

Blocks are racing to secure alternative gas supplies to avoid a potentially catastrophic shortage this winter. But a crisis could strike sooner than expected depending on Russia’s next move.

The International Monetary Fund said on Tuesday that a complete shutdown of Russian gas supplies could reduce GDP in Hungary, Slovakia and the Czech Republic – countries particularly dependent on Moscow’s exports – by up to 6 %.

“At a time when the crisis will deepen as we move into summer and then fall, it’s increasingly a matter of ‘when’, not ‘if’ the crisis comes,” he said. Vladimir Petrov, high power. analyst at Rystad Energy, said in a note Monday.

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

According to the IEA, even if European nations manage to fill their gas stores to 90% of capacity, they are still likely to face supply disruptions early next year if Russia decides to plan to cut gas deliveries from October.

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

“This is a large request, but it does not exaggerate the scale of what is needed,” Birol said in a press statement Monday.

He added: “It is clearly not enough to rely solely on gas from non-Russian sources – these supplies are simply not available in the volumes needed to replace short deliveries from Russia. Russia.

Mark Thompson and Nadine Schmidt contributed reporting.

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