Tensions mount between the Kremlin and the West as Gazprom cuts gas flows into Europe
Europe is facing up to the growing prospect of a future without Russian gas, with Germany and Kremlin-backed Gazprom at loggerheads over dwindling supplies from the key Nord Stream 1 pipeline.
Gazprom has reduced flows from the pipeline for two consecutive days, which runs under the Baltic to Germany.
The latest move cuts supply to just 40 per cent of the pipeline’s overall capacity.
Nord Stream 1 has the capacity to pump about 55 billion cubic metres a year to the European Union (EU) – over a third of the supplies it imported from Russia via pipelines last year.
The German government has now issued a direct appeal to citizens of the European Union’s (EU) biggest economy to conserve energy.
Deputy Chancellor Robert Habeck described the situation as “serious” and argued that “now is the time” for people to save energy and store gas.
“Every kilowatt hour helps in this situation,” he said in a video appeal on Twitter.
Earlier this year, the country imposed the early-phase of emergency gas plans which could eventually lead to the government taking hold of energy supplies and delegating resources.
This followed Russian President Vladimir Putin signing into law requirements for “unfriendly” overseas buyers to pay for its gas in roubles – even if they had signed contracts with euros and dollars payment options.
Multiple companies, including German energy giant Uniper complied via a murky conversion process that technically evades EU sanctions, however others did not – with Gazprom cutting off flows to major energy firms in Poland, Bulgaria, Finland, Denmark, and Netherlands in recent weeks.
Germany is not the only country with contingency plans, with Austria and Italy also unveiling new measures to counter potential shortfalls.
Europe scrambles to secure supplies ahead of cold winter months
Russia has cited maintenance issues for the disruption to gas supplies, with the Kremlin insisting the drop-offs are not premeditated, warning that delays in repairs could lead to the suspension of all flows.
Gazprom chief executive Alexey Miller has further argued that Western sanctions made it impossible to secure the return of equipment from Canada for the pipeline’s Portovaya compressor station.
However, Habeck has described Russia’s excuse as technically “unfounded”, and accused them of aiming to drive up gas prices. “
He said: “The Russian side’s argument is simply a pretext. It is obviously a strategy to unsettle and drive up prices.”
Any more setbacks in Russian gas flows would be highly damaging for the trading bloc, which is calling on member states to shore up supplies to 80 per cent of storage capacity by October, and 90 per cent by November, ahead of peaks in energy consumption this winter.
The latest figures from iGas suggests average storage levels across the EU sit at around 52 per cent.
Cutting flows through Nord Stream 1 would make that job harder, the head of the Germany energy regulator said.
“We could perhaps get through the summer as the heating season is over. But it is imperative that we fill the storage facilities to get through the winter,” Klaus Mueller told Thursday’s edition of Rheinische Post daily.
Europe’s challenge will be made more difficult this month as Nord Stream 1 will shut completely during the pipeline’s annual maintenance on July 11-21.
Trading bloc vulnerable to disruptions in Kremlin-backed gas
While the EU has finalised coal and oil embargoes, only Lithuania has unilaterally ditched Russian gas supplies, with the bloc dependent on Gazprom for around 40 per cent of its imports.
Germany did halt the approval process for the Nord Stream 2 pipeline, but still remains dependent on Russia for around 50 per cent of its imports.
It is not the only country still engaged in the Russian market, as Europe has continued to buy Russian gas supplies in huge quantities, with the Centre for Research on Energy and Clean Air (CREA) revealing that the EU has bought 61 per cent of Russian supplies on the market since the country invaded Ukraine.
The bloc has bought €57bn of the €93bn worth of fossil fuels available from the Kremlin, including €25.5bn on natural gas.
However, the continent has reduced its buy in recent weeks, and with a coal and oil embargo set this year – it has continued to search for alternative buyers.
Norway, Europe’s second biggest exporter behind Russia, has been pushing up production to help the European Union towards it target of ending reliance on Russian fossil fuels by 2027.
Meanwhile, EU members states have also boosted liquefied natural gas (LNG) imports – particularly from the US – while multiple countries have contacted Azerbaijan to boost gas supplies.
Azerbaijani President Ilham Aliyev has revealed more than 10 billion cubic metres of gas will be supplied to Europe in 2022.
Currently, Georgia, Turkey, Italy, Greece, and Bulgaria are already buying gas from Azerbaijan
However, Europe has limited LNG import capacity and the already tight LNG market has faced additional challenges with disruptions to US LNG following an explosion at a Texas plant operated by Freeport LNG.
It will be offline until September and will operate only partially from then until the end of 2022.
The facility accounts for about 20 per cent of U.S. LNG exports and has been a major supplier to European buyers.
French asset manager UBS has forecast that it will be a greater challenge for Europe to refill amid the current headwinds.
UBS analyst Henri Patricot said: “It could be difficult for Europe to sustain the recent above-average gas injection levels over the rest of year as Asian LNG imports are likely to pick up in upcoming months. Developments this week, including the extended Freeport LNG outage and disruptions to Russian gas flows via Nord Stream 1, mean it will be a greater challenge.”
Faltering flows come as the leaders of Germany, Italy and France visit Ukraine, which is pressing for swifter weapons deliveries to battle invading Russian forces and wants support for Kyiv’s bid to join the European Union.