Germany began the “alarm phase” of its emergency gas plan on Thursday in response to a drop in Russian supplies, but barred utilities from allowing rising energy costs to pass on to customers in Europe’s biggest economy.
The measure is the latest escalation in the standoff between Europe and Moscow since the Russian invasion of Ukraine that has exposed the bloc’s reliance on Russian gas supplies and sparked a frantic search for alternative energy sources.
The decision, announced by Germany’s economy minister, marks a significant turnaround especially for Europe’s largest economy, which has cultivated strong energy ties with Moscow dating back to the Cold War.
The government activates the Phase 2 “alarm phase” of the three-stage emergency plan when it sees a high risk of a long-term supply shortage of gas and theoretically passes higher prices to utilities to industry and households. and thus helps reduce demand.
Industry sources said Germany’s gas buyers and utilities are pushing for Phase 2 for this reason.
Faced with declining gas flows from main supplier Russia, Germany has been in Phase 1 of its emergency plan since late March, which includes strict monitoring of daily flows and a focus on filling gas storage facilities.
A move to the next one has been the subject of speculation as Russian supplier Gazprom last week cut flow through the Nord Stream 1 pipeline to just 40% of capacity, accusing it of delaying the return of serviced equipment due to restrictions.
In the second phase, the market is still able to absorb the missing volume without the need for state intervention which will start in the final emergency phase.
Several European countries have outlined a series of measures to combat the supply crisis to address concerns about winter energy shortages and rising inflation that test Europe’s resolve to maintain sanctions on Russia. Can do.
This has prompted the Germans to consider painful cuts in their production and to resort to polluting forms of energy previously thought unthinkable as they accommodate the prospect of running out of Russian gas.
Dutch front-month gas futures, the European benchmark, rose 4% to 131.50 euros per megawatt/hour (MWh) in morning trade.
The European Union on Wednesday accused Russia of a “wicked move” on cutting gas and indicated it would temporarily turn to coal to address an energy shortage. Russia has denied that the gas supply cuts were pre-planned.
Gazprom said last week it was cutting off flow through Nord Stream 1, which could develop into a diplomatic headache centered around turbines sent to Canada for repairs.
A giant Siemens Energy gas turbine used in the Nord Stream, built in Canada, was sent back there for maintenance. Canadian officials have expressed concerns about Moscow violating sanctions, making it impossible for Siemens to obtain part of the pipeline.
Canadian Natural Resources Minister Jonathan Wilkinson told Reuters the G7 could discuss the fate of the turbines at its meeting starting Sunday, citing Germany’s concerns about gas supplies.
“I’m sure it will at least make it into the aisles of the G7,” he said. “I won’t hold my breath that we’re going to find a resolution before the end.”
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