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Germany is at risk of recession as Russia’s gas crisis deepens According to Reuters



© Reuters. FILE PHOTO: Pipes at the amphibious facility of the ‘Nord Flow 1’ gas pipeline are pictured in Lubmin, Germany, March 8, 2022. REUTERS/Hannibal Hanschke/File Photo

By Rachel More and Stine Jacobsen

The country will consider providing financial support to help companies refill gas storage to avoid a deeper crisis in winter, an industry body warned on Tuesday.

European Union nations from the Baltic Sea in the north to the Adriatic in the south have drawn up countermeasures to the supply crisis following Russia’s invasion of Ukraine, putting energy at the heart of their economic war between Moscow and the West.

The EU was dependent on Russia for 40% of its pre-war gas needs – rising to 55% for Germany – leaving a huge gap to fill the already tight global gas market. Several countries have temporarily postponed plans to close coal power plants in response.

Global gas prices have skyrocketed, sending inflation still higher and creating an even bigger headache for policymakers trying to get Europe back out of the economic storm.

The German industry association BDI cut its economic growth forecast for 2022 on Tuesday to 1.5%, revised down from the 3.5% expected before the war. It said stopping Russian gas supplies would make an economic downturn inevitable.

Russian gas is still being pumped through Ukraine but at a reduced rate, and the Nord Stream 1 pipeline under the Baltic, a key supply route for Germany, is operating at only 40% of capacity, which Moscow says is due to orders Western sanctions are hindering the repair. Europe sees this as a reason to reduce flows.

The slowdown has hampered Europe’s efforts to add storage facilities, now around 55% full, to meet EU-wide targets of 80% by October and 90% by November. could help this block get through the winter if supply is further disrupted. .

Italy’s Minister of Ecological Transition Roberto Cingolani said Italy needs to accelerate its gas loading efforts and Rome needs to consider how to help companies finance purchases of gas for storage.

An Italian government source said state guarantees are a potential option to help reduce financing costs.

“Gas is so expensive right now that operators can’t put money in,” says Cingolani.

Benchmark gas prices for Europe traded around 126 euros ($133) per megawatt hour (MWh) on Tuesday, below this year’s high of 335 euros but still up more than 300% from a year ago. before.

EARLY WARNING

Italy, along with other countries such as Germany, Denmark, Austria and the Netherlands, has activated the first early warning phase of a three-phase plan to deal with the gas supply crisis.

As part of Germany’s contingency plan, gas regulator Bundesnetzagentur has revealed details of a new auction system that will begin in the coming weeks, aimed at incentivizing producers to consume less gas. .

The head of the Bundesnetzagentur questioned whether the current gas supply would help the country get through the winter, although he previously said it was not time to declare a full state of emergency, or a second phase. three of the crisis plan.

“As it is today, we have a problem,” said Bundesnetzagentur President Klaus Mueller on the sidelines of an industry event in the German city of Essen.

Sky-high prices in Europe have attracted more LNG cargo, but Europe lacks the infrastructure to meet all of its needs from LNG, a market that stretched even before the Ukraine war.

Disruptions to a major US liquefaction producer that supplies shipments to Europe add to the challenge.

Europe is looking for more supplies from its own producers, such as Norway, and other countries, such as Azerbaijan, but most producers have pushed output limits.

As the crisis dragged across Europe, even a small consumer like Sweden joined its European allies in launching the first phase of an energy crisis plan.

The state energy agency on Tuesday said supply remained ample but it was signaling “to industry players and gas consumers connected to Sweden’s western gas network that the market A tense gas market and a worsening gas supply situation may arise.”

Sweden, where gas will account for only 3% of energy consumption in 2020, depends on gas supplies from Denmark, where storage facilities are now 75% full. Denmark activated the first phase of its emergency plan on Monday.

(1 dollar = 0.9477 euros)



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