Germany has triggered the “alarm stage” of its emergency gas plan in response to falling Russian supplies but stopped short of allowing utilities to pass on soaring energy costs to customers in Europe’s largest economy.
Key points:
- Germany’s step is largely symbolic, but marks a major shift
- Gas rationing will, hopefully, be avoided but cannot be ruled out, Economy Minister Habeck says
- The Kremlin says Russia “strictly fulfils all its obligations” to Europe
The measure is the latest escalation in a stand-off between Europe and Moscow after the February 24 Russian invasion of Ukraine that has exposed the bloc’s dependence on Russian gas supplies and sparked a frantic search for alternative energy sources.
Germany’s step is a largely symbolic signal to companies and households but it marks a major shift for the country, which cultivated strong energy ties with Moscow stretching back to the Cold War.
Lower gas flows sparked warnings this week that Germany could fall into recession if Russian supplies halted all together.
A survey on Thursday showed the economy losing momentum in the second quarter.
“We must not fool ourselves: The cut in gas supplies is an economic attack on us by [Russian President Vladimir] Putin,” Economy Minister Robert Habeck said in a statement.
Gas rationing would hopefully be avoided but cannot be ruled out, Mr Habeck said.
“From now on, gas is a scarce commodity in Germany … We are, therefore, now obliged to reduce gas consumption, now already in summer.”
Russia has denied the supply cuts were deliberate, with state supplier Gazprom blaming a delay in the return of serviced equipment caused by Western sanctions.
On Thursday, local time, the Kremlin said Russia “strictly fulfils all its obligations” to Europe.
Berlin will provide a 15-billion-euro credit line to fill gas storage and launch a gas auction model this summer to encourage industrial users to save gas.
The second “alarm stage” of a three-stage emergency plan means authorities see a high risk of long-term supply shortages.
It includes a clause allowing utilities to immediately pass on high prices to industry and households.
However, Mr Habeck said Germany was not at that point, but the clause might be triggered if the supply squeeze and price gains persisted, pushing power companies deeper into the red.
“If this minus becomes so big that the companies can’t bear it any more and they fall down, the whole market threatens to fall down at some point — so a Lehman Brothers effect in the energy system,” he said, referring to the US investment bank’s 2008 collapse that rippled through global financial markets.
Local utility association VKU asked the government to protect consumers with subsidies or risk utilities going bust because of low-income retail customers defaulting on payments.
The president of the Federal Network Agency, Klaus Mueller, said it was possible for consumer prices for gas to triple.
“If you extrapolate it, it depends a lot on how you heat, how your building is built, but it can triple the previous gas bill,” he told RTL/ntv broadcasters.
The move to Phase 2 had been anticipated since Gazprom cut flows via the Nord Stream 1 pipeline across the Baltic Sea to just 40 per cent of capacity last week.
Data released on Thursday showed that Germany has imported 22 per cent less natural gas in the first four months of 2022 but the cost surged 170 per cent over the same period.
Facing dwindling deliveries from its main supplier, Germany has since late March been at Phase 1, which includes stricter monitoring of daily flows and a focus on filling gas storage facilities.
“The declaration of the alarm stage does not immediately change the fundamental status quo,” German energy provider E.ON said.
It was important, though, that the government was preparing and taking steps to stabilise markets and gas supply, it said an emailed statement to Reuters.
Reuters
Posted , updated
