Germany activates gas ‘alarm phase’ amid Russian ‘economic attack’ – National

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

The move is the latest escalation in a deadlock between Europe and Moscow since Russia’s invasion of Ukraine, which exposed the bloc’s reliance on Russian gas supplies and sparked a frenzied search for alternative energy sources.

The decision is largely symbolic as a signal to businesses and households that painful austerity measures are on the way. But it marks an important shift for Germany, which has maintained strong energy ties with Moscow since the Cold War.

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

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“We should not kid ourselves: the reduction in gas supply is an economic attack on us by (Russian President Vladimir) Putin,” Economy Minister Robert Habeck said in a statement, adding that Germans should reduce consumption. Reduce.

Gas rationing would hopefully be avoided but cannot be ruled out, Habeck said, warning:

“Gas is now a scarce commodity in Germany… So we are now obliged to reduce gas consumption, already in the summer.”

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Russia has denied that the cut in gas supplies was premeditated, with state supplier Gazprom blaming a delay in returning serviced equipment due to Western sanctions. The Kremlin said on Thursday that Russia remains a reliable energy supplier and “strictly complies with all its obligations” to Europe.

Under the Phase 2 plan, Berlin will provide a EUR 15 billion (USD 15.76 billion) line of credit to fill gas storage facilities and launch a gas auction model this summer to encourage industrial users to conserve gas.

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

Habeck said Germany wasn’t there at the time, but the clause could be triggered if prices continued to rise due to the supply shortage, exacerbating energy companies’ losses.

“Every day, every week you make a minus. And if this minus gets so big that the companies can’t handle it anymore and they fall, at some point the entire market threatens to collapse – so a Lehman Brothers effect in the energy system.”

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

Facing dwindling supplies from main supplier Russia, Germany has been in phase 1 of its contingency plan since late March, which includes stricter monitoring of daily flows and a focus on filling gas storage facilities.

“Declaring the alarm phase does not immediately change the fundamental status quo,” said German energy supplier E.ON. However, it was important that the government prepare for a significant drop in imports and take steps to stabilize markets and gas supplies, a statement emailed Reuters said.

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In the second phase, the market can still function without the need for state intervention, which would usher in the last emergency phase.

“The recent decline in flows to Germany via the Nord Stream1 pipeline, if left at this level, will lead to gas shortages in the coming winter,” said Ole Hansen, head of raw materials strategy at Saxo Bank.

The Dutch wholesale price for gas, the European benchmark, rose by no less than eight percent on Thursday.

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

Russian gas flows to Europe through Nord Stream 1 and through Ukraine were stable on Thursday, while reverse flow on the Yamal pipeline picked up, operator data shows.

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Several European countries have mapped out measures to deal with a supply shortage and to avert winter energy shortages and an inflation spike that could test the continent’s determination to maintain sanctions against Russia.

The supply constraints have also prompted German companies to consider painful cuts in production and resort to polluting forms of energy previously unimaginable as they adjust to the prospect of Russian gas running out.

The European Union said on Wednesday it would temporarily switch to coal to fill energy shortages, while calling gas supplies to Moscow “rogue”.

Frans Timmermans, the bloc’s head of climate policy, said on Thursday that 10 of the EU’s 27 member states have issued an “early warning” about gas supplies – the first and least severe of three crisis levels identified in EU regulations for gas supply. energy security.

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“The risk of complete disruption to the gas is now more real than ever before,” he said.

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