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Germany Warns of Gas Crisis After Russia Reduces Supply


Germany warned residents and businesses on Thursday that the country was in a natural gas crisis that could worsen in coming months.

“The situation is serious, and winter will come,” Robert Habeck, Germany’s economy minister, told reporters at a news conference in Berlin. He said the government had triggered the second stage of its three-step energy gas plan; the next stage would permit the government to begin gas rationing.

“Even if you don’t feel it yet: We are in a gas crisis,” he said. “Gas is a scarce commodity from now on. Prices are already high, and we have to be prepared for further increases. This will affect industrial production and become a big burden for many consumers.”

Last week, Russian’s state energy giant, Gazprom, reduced the amount of natural gas it was delivering to Germany by 60 percent, in what appeared to be the latest move to punish Europe for sanctions and military support for Ukraine.

Gazprom has pinned blame for the reductions on a turbine for a compressor station that was sent to Canada for repairs and has not been returned because of sanctions. But Mr. Habeck called Gazprom’s cutbacks a deliberate economic attack by Russia’s president, Vladimir V. Putin.

“It is obviously Putin’s strategy to create insecurity, drive up prices and divide us as a society,” he said.

The recent developments have created concerns that the gas crisis is gaining dangerous momentum that could have unforeseen consequences for the wider economy, and that governments are not moving fast enough to stop it.

“We are one step away from the rationing of gas across Europe, which would impact many sectors, businesses and consumers,” said Biraj Borkhataria, an analyst at RBC Capital Markets, an investment bank. Policymakers seem to have found themselves unable to act quickly enough given the speed of events.”

Mr. Borkhataria said Russia’s actions in Germany could lead to “contagion and knock-on effects” across Europe because the gas markets are connected. So, for example, restrictions on flows to Germany are likely to affect prices in Britain.

Russia is also inflicting financial damage on its corporate customers. One concern is that utilities that have contracts to buy gas from Gazprom will find themselves short of the fuel and then need to buy additional supplies at much higher prices to fulfill their obligations, leading to losses.

“Due to the restrictions on the Nord Stream 1 pipeline, only significantly smaller quantities of gas are currently coming from Russia, and replacements can only be procured on the markets at very high prices,” said Klaus-Dieter Maubach, chief executive of Uniper, a German utility, in a statement. Uniper has said it is receiving only 30 percent to 60 percent of its requested volumes.

The shortages have driven gas prices to extraordinarily high levels, about six times what they were a year ago. Mr. Habeck warned that the such high prices were forcing energy providers to take on losses, which could threaten the entire energy market.

“If this minus gets so big that they can’t carry it anymore, the whole market is in danger of collapsing at some point,” Mr. Habeck said, drawing a parallel to how the collapse of Lehman Brothers triggered the global financial crisis.

Mr. Maubach welcomed the government’s emergency plan as a “viable instrument” for coping with the gas situation for now, but warned that more extensive measures would be needed “if the supply situation remains like this or becomes even worse.”

Since late March, when Germany entered the first phase of its plan, the government has focused on increasing its gas storage, which is at more than 58 percent of capacity. But activating the second stage of the emergency plan means the government sees a high risk of long-term supply shortages.

The German government approved a 15 billion-euro, or $15.7 billion, line of credit on Wednesday for utilities to buy natural gas to fill storage facilities. In addition, the government plans to start a program that would help the gas system cope by encouraging companies to suspend their use of gas temporarily. The unused fuel would then be made available for other industrial users for the cheapest price.

But the government decided against allowing gas providers to pass on the soaring costs of energy to customers, after businesses pushed back against the measure.

German companies have been looking for alternative energy sources and ways to save gas, and Mr. Habeck said they had been able to cut their use by around 8 percent in recent weeks. The government has also passed a law that would allow utilities to restart coal-fired power plants that either had been shuttered or were scheduled for phaseout. The Netherlands and Austria have taken similar measures.

Nord Stream 1, the main pipeline supplying Russian gas to Germany, is scheduled for regular maintenance for about two weeks beginning July 11, when flows will stop, raising concerns that Gazprom could take advantage of the situation to halt deliveries for even longer.



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