Russia says it is ready to supply gas to Europe, describing ongoing fears of a cutoff as a “man-made crisis” created by Europe.
Bloomberg | Bloomberg | Getty Images
Russia is poised to temporarily shut down the Nord Stream 1 pipeline – the largest part of the European Union’s gas import infrastructure – for annual maintenance. The works have raised fears of further gas disruptions, undermining the bloc’s efforts to prepare for winter.
Some fear the Kremlin could use scheduled maintenance to shut down the taps for good.
Summer maintenance activities for the gas pipeline, which runs under the Baltic Sea from Russia to Germany, are scheduled to take place from July 11 to 21.
It comes as European governments scramble to fill underground natural gas supplies in a bid to provide households with enough fuel to keep the lights on and homes warm in winter.
The EU, which gets roughly 40 percent of its gas through Russian pipelines, is trying to quickly reduce its dependence on Russian hydrocarbons in response to President Vladimir Putin’s months-long offensive in Ukraine.
We cannot rule out the possibility that gas transport will not be resumed after that for political reasons.
Klaus Müller
Head of Germany’s energy regulator
Klaus Mueller, the head of Germany’s energy regulator, told CNBC that Russia could continue to cut gas supplies to Europe after the planned end of repair work.
No gas is expected to be transported through the pipeline once the annual inspection begins, the Bundesnetzagentur’s Müller said, adding: “We cannot rule out the possibility that gas transport will not be resumed afterwards for political reasons.”
Analysts at political risk consultancy Eurasia Group agree.
If supplies “do not recover after the maintenance because President Putin is playing games or wants to hit Europe while it hurts, then the plan to fill gas storage by the end of the summer probably won’t work,” Henning Glostein, director of energy, climate and resources at Eurasia Group, CNBC said by phone.
The Nord Stream 1 pipeline is majority owned by the Russian gas company Gazprom. The state-backed energy giant did not respond to CNBC’s request for comment.
One of the key concerns for policymakers in the EU and the energy sector in general is that they “virtually have no idea what’s going to happen” because most communications with Gazprom have already been cut, Glostein said.
Before that, they were relatively open and frequent until May.
Prospects for winter supplies
Pipeline flows from Russia to Europe have been in the spotlight in recent weeks amid growing fears of a disruption.
Russia has cut its gas flows to Europe by around 60% and it is not yet known when or if gas flows from Nord Stream 1 will return to normal levels. Gazprom cited the delayed return of equipment serviced by Germany’s Siemens Energy in Canada for its reduced pipeline flows.
Kremlin spokesman Dmitry Peskov earlier said Russia was ready to supply gas to Europe, describing the situation as a “man-made crisis” created by Europe.
German Economy Minister Robert Habeck and Chancellor Olaf Scholz are pictured during a weekly cabinet meeting on July 1, 2022.
Picture Alliance | Picture Alliance | Getty Images
German Economy Minister Robert Habeck rejected that claim, saying the cut in Russian supplies was a “political decision” designed to upset the region and raise gas prices.
Late last month, Germany moved to the second so-called “alert level” of its gas emergency plan. The measure means Europe’s biggest economy sees a high risk of long-term gas supply shortages, but believes the market is still able to manage the disruption without the need for intervention.
Eurasia Group said that if Putin were to direct a complete shutdown of gas supplies after the scheduled end of repair work on the Nord Stream 1 pipeline – in what Glostein described as a “maximum economic war” scenario – Germany would likely be forced to to the third level of its three-stage emergency gas plan.
At this level, Germany’s Bundesnetzagentur will have to decide how to distribute gas supplies across the country.
“Hotspot for the whole EU”
“Germany has become a hot spot for the whole EU,” Gloestein said. “Germany has the largest population in Europe, it is the largest economy, it is the largest consumer of gas, it is the largest importer of Russian gas and it has nine land borders. So whatever happens in Germany spreads to the rest of Europe.”
Indeed, it is not only the German authorities who are deeply concerned by the prospect of further supply cuts.
In Italy, the EU’s second-biggest buyer of Russian gas, the government said last week it was giving state-owned Gestore dei Servizi Energetici 4 billion euros ($4.2 billion) to buy gas to boost supplies.
Germany, Italy, Austria and the Netherlands have also indicated that coal-fired plants could be used to offset cuts in Russian gas supplies.
“That’s actually why … we think Russia will come back a little bit,” Glostein said. “They want a bit of bargaining chip in case the Europeans tighten the sanctions further so the Russians can retaliate.”
Russian President Vladimir Putin attends the IX Forum of the Regions of Russia and Belarus via video link in Moscow, July 1, 2022.
Michael Metzel | Afp | Getty Images
Glostein said a complete shutdown of gas supplies through the Nord Stream 1 pipeline for the rest of the year seemed unlikely, especially because such a move would contradict Moscow’s own narrative.
The Kremlin has previously claimed that the current reduction in supplies is due to “technical factors” and economic sanctions.
Keeping at least some flows would also allow Russia to take advantage of high prices and retain the option of more drastic cuts later in the year, Gloystein said, potentially in retaliation for proposed Western caps on oil or gas prices.
Data from the German grid shows that in previous years, Russian gas flows through the Nord Stream 1 pipeline had recovered by the end of July following maintenance work in the summer.
Thomas Rogers, a European gas analyst at energy consultancy ICIS, said he did not expect flows to be cut off completely – and pointed to individual maintenance work being completed on time.
“We don’t currently see any resolution to the suspected compressor issues that pushed NS1 flows to this low level, but we don’t expect a complete shutdown once this work is complete,” he told CNBC.
“Recent work on the TurkStream pipeline, which delivers Russian gas to Southeast Europe via the Black Sea and Turkey, was recently completed on schedule and without further disruption.”
Add Comment