Gas prices tripling is 'within realm of possibility' says expert
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An energy crisis in Europe’s top economy has been looming since last month when Gazprom, the Kremlin-controlled gas monopoly, reduced flows to Germany through the critical Nord Stream 1 by 60 percent. Later, the pipeline was brought fully out of action for routine maintenance, leading to fears in Berlin that it may not return at all.
In an obvious reflection of the impact Russia’s war on Ukraine is having on the West, Berlin is nervously waiting to find out whether flow returns to the Nord Stream 1 today.
While it should get back to normal, the government is concerned Moscow may not stick to its plans.
Germany’s Vice-Chancellor and Economics Minister Robert Habeck said he fears Gazprom may cite “some little technical detail” as an excuse not to restart gas deliveries through the pipeline after the works are completed.
Currency specialist Marc-André Fongern described the scenario as a “disaster waiting to happen”, adding that Germans have been warned of “blackouts, gas shortages” and an energy bill hike of €1,500€ to €3,000.
Chancellor Olaf Scholz condemned the Kremlin’s approach to the energy matter in a strongly-worded op-ed published by the Frankfurter Allgemeine newspaper on Sunday.
He said: “When [Vladimir] Putin cuts gas supplies, he uses energy as a weapon.
“Not even the Soviet Union did that during the Cold War.”
Only a day before Germany is due to find out how the Nord Stream 1 saga continues, the European Union set out emergency plans for member nations to cut their gas use by 15 percent until next year.
The continent is racing to fill its gas storage ahead of winter and build a buffer in case Moscow further restricts supplies in retaliation for the bloc’s support for Ukraine following Putin’s full-scale invasion in late February.
And among the dozen EU countries already facing reduced Russian deliveries is, of course, Germany.
In the face of unlikely improvements in the West’s relations with Russia and amid warnings by some officials that a full gas halt is likely, the European Commission on Wednesday proposed a voluntary target for all EU countries to cut gas use by 15 percent from August to March, compared with their average consumption in the same period from 2016 to 2021.
The proposal would enable Brussels to make the target mandatory in a supply emergency in which the EU declared a substantial risk of severe gas shortages.
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The regulation needs approval from a reinforced majority of bloc members, and country diplomats are set to discuss it on Friday with the aim of approving it at an emergency meeting of their energy ministers next Tuesday.
EU Commission President Ursula von der Leyen said: “Russia is blackmailing us. Russia is using energy as a weapon. And therefore, in any event, whether it’s a partial, major cut-off of Russian gas or a total cut-off of Russian gas, Europe needs to be ready.”
The EU’s worries were exacerbated earlier this week as it emerged Gazprom had told European customers it cannot guarantee gas supplies, declaring “force majeure” to at least one major client, according to a letter seen by Reuters.
The “force majeure” clause, known as an “act of God” clause, is invoked to lift a business from contractual obligations because of factors beyond its control. In a letter dated July 14, Moscow-backed Gazprom said it could not fulfil its supply commitments because of “extraordinary” circumstances.
The legal force of the letter, seen by Reuters on Monday, is to shield the Russian state gas monopoly from compensation payments for disrupted supplies.
The declaration of “force majeure” is effective from June 14, exonerating Gazprom from any punishment for delivery shortfalls since then.
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