Has Putin stopped Europe’s gas for good? – POLITICO


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EU leaders are bracing for a gas supply crunch that could freeze whole sectors of the bloc’s economy as fears grow that a major pipeline ferrying Russian gas to Europe will be shut down for good.

The scenario of rich European countries having to ration their energy usage — and having to decide to switch off major industries — loomed closer on Monday as the flow of natural gas to Europe via the Nord Stream pipeline fell to zero.

The stoppage was part of a planned 10-day outage, but analysts and officials worry that Russia’s Gazprom, which has already shut off or limited gas supply to 12 EU countries, could choose not to reactivate the Nord Stream pipeline when the maintenance work is over.

Such a move would tip an economy like Germany’s further into crisis, with officials in Berlin warning that energy-intensive industries could be paid to reduce consumption in what German Vice Chancellor Robert Habeck on Sunday called a “political nightmare scenario.”

All eyes are on Nord Stream for now.

“What happens after the maintenance? What does it go back to afterwards? That’s what everyone will be following,” said Ed Cox, head of global liquefied natural gas (LNG) at commodity intelligence firm ICIS.

Some analysts argue that Russia is not likely to reopen the pipeline and would find excuses to keep it shut down beyond the 10-day maintenance stoppage.

This scenario is “pretty likely,” according to Alexander Gabuev, a senior fellow at the Carnegie Endowment for International Peace in Washington, arguing that a full shutdown of gas supply to Europe was a key tool in Russian President Vladimir Putin’s arsenal to divide Europe over Ukraine ahead of winter, when the worst effects of a gas shortage would be felt.

“Gas is obviously the card that the Kremlin has,” said Gabuev.

France’s finance minister, Bruno Le Maire, voiced that fear on Sunday, saying a total shutdown of Russian gas to Europe was “the most likely option,” and that countries needed to “put ourselves in order of battle as of now.”

On July 20, EU officials in Brussels will publish a winter preparedness plan that will attempt to ensure countries have enough gas to get through the winter. But details of the plan are vague so far.

“The situation is clearly serious and we need to be adequately prepared for any eventuality,” a spokesperson for the European Commission said Monday.

Other options under consideration include bailouts for energy companies, states taking control of power plants and gas rationing for industry.

Gas brinkmanship

The state of alarm in Paris and Berlin is a far cry from the more upbeat mood three months ago in Brussels, when top officials announced a coordinated pivot away from Russian gas and a goal to reduce dependence by two-thirds this year.

“It’s not easy but it’s feasible,” European Commission Executive Vice President Frans Timmermans said at the time.

The EU has already missed that lofty target — by June 16 it had already imported more Russian gas than it had budgeted for the year. That’s even when taking into account Moscow shutting off supply to some EU countries and slowing deliveries to others.

For now, European gas traders are holding their breath as Nord Stream powers down for its annual checkup.

Panic flared briefly Monday as Italy’s Eni, a major energy company, said its deliveries from Gazprom had fallen from 32 million cubic meters per day to 21 million. 

Has Putin stopped Europe’s gas for good? – POLITICO
Jean-Christophe Verhaegen/AFP via Getty Images

But the reduced supply was linked to the shutdown of Nord Stream and not, as some had feared, an additional cut in Russian flows via other pipelines crossing Ukraine or via the Turkstream pipeline branch, which passes through Bulgaria.

Even so, in previous years, Russia has compensated for the reduced supply during the maintenance of Nord Stream by routing more gas via other routes. This year it has not done so — at least so far.

With its invasion of Ukraine grinding on, Russia is already using energy supply as a bargaining chip to try and break Western unity and get sanctions against Moscow lifted.

On Friday, Kremlin spokesman Dmitry Peskov dangled the possibility of “boosting” volumes of gas through Nord Stream beginning July 21, but only if Canada allows the return of a gas turbine critical to the operation of Nord Stream, which is currently out for repair in Montreal.

In an email to POLITICO, Canada’s natural resources ministry confirmed the country would release a total of six turbines to Nord Stream via a one-time sanctions exception.

Berlin and the U.S. cheered, but Kyiv fumed, after having privately pushed Ottawa not to return the parts. 

“The decision on the exception to sanctions will be perceived in Moscow exclusively as a manifestation of weakness,” said Ukrainian President Volodymyr Zelenskyy on Monday. “There can be no doubt that Russia will try not just to limit as much as possible, but to completely shut down the supply of gas to Europe at the most acute moment. This is what we need to prepare for now, this is what is being provoked now.”

‘Shorter showers, lower heat’

If Moscow doesn’t restart Nord Stream, Europe’s options to obtain an alternate supply of gas are limited.

Earlier this year, seaborne liquefied natural gas arriving in the EU — mostly from the U.S. — hit record levels. But the June explosion and outage at a key Texas export facility imperiled the bloc’s plans to rely on the Americans, at least for the rest of this year. 

Gulf states have offered to boost production, but these proposals come with political strings attached, as with Oman’s request for visa-free travel in the EU for its citizens.

“We’re in a situation where there are limits to how much other sources of gas you can get into Europe and there are limits on what LNG can do,” said Tom Marzec-Manser, head of gas analytics at ICIS. “We’re pretty much on top of those limits.”

Piped gas from regional neighbors such as Azerbaijan and Norway has increased, and this month Oslo approved a production hike to support exports. But the Norwegian government cautioned that “companies on the Norwegian shelf today produce at their maximum level, or very close to this.”

Has Putin stopped Europe’s gas for good? – POLITICO
Russian President Vladimir Putin | Matthew Stockman/Getty Images

The Netherlands announced it had succeeded in cutting energy consumption by a third already so far this year, potentially allowing some extra gas to be rerouted to neighbors. But Dutch Climate Minister Rob Jetten warned that ramping up the earthquake-prone Groningen field, Europe’s largest, to save the day would be a “last resort.”

Fatih Birol, director of the International Energy Agency, described the situation in blunt terms earlier this year: “Either governments or utilities will have to ration themselves — cut the energy to the consumers — or we do it ourselves, pushing the energy efficiency button.”

According to an analysis by the Bruegel think tank, EU countries will need to cut demand by 15 percent over the next 10 months if Russia shuts off all supply of gas. In the Baltic states and in Finland, governments may have to make reductions of up to 54 percent.

As the mood darkens, leaders and executives are making public pleas for rationing that would have been unthinkable just a few months ago.

In France, the CEOs of three of the country’s largest energy companies pleaded with people to save energy in a joint op-ed.

Dutch politicians have urged citizens to take shorter showers and reduce heating to beat the crunch.

Local authorities in Germany are resorting to measures including dimming street lights and reducing temperatures in open-air swimming pools, after the country activated a stage-two emergency warning last month. 

And while EU lawmakers have cheered progress on a new mandatory gas supply regulation that would require storage to be filled to 80 percent by November, negotiators are still fiercely tussling over who pays for the gas — and who gets priority access in an emergency. 

Current storage levels are at 61.6 percent, according to real-time data. 

When full, the bloc’s storage can hold roughly a fifth of its annual consumption — but the facilities are not designed to be drawn down to zero, and are spread unevenly around the Continent, making equal access in a crisis anything but certain. 

Looking out for No. 1

So far at least 10 EU countries have activated the first “early warning” stage of their emergency contingency plans, which Brussels has required members to have in place since 2017

Heavily reliant on Russian gas, Germany is the only country to have triggered the second stage. Triggering the third stage would allow Berlin to intervene in the market and become the national energy supply coordinator, determining which sectors get cut off first.

In such a scenario, politicians would likely start by cutting off nonessential sectors such as the automotive sector, followed by other industries, then social services and finally residential heating, according to Simone Tagliapietra, a senior energy analyst at the Bruegel think tank.

On Monday, Germany and the Czech Republic pledged jointly to “stand united to provide operational cooperation and coordination in case of complete disruption of gas supplies which may occur in upcoming weeks.”

But many fear an every-state-for-itself scenario in which countries keep gas within their own borders.

That’s why the European Commission encourages countries to set up voluntary cross-border “solidarity agreements” to share gas in times of need. 

Only six such agreements have been established so far, and “the issue is that that might not be strong enough,” Tagliapietra said, because these bilateral deals have no enforcement mechanism.

Laurenz Gehrke contributed reporting.

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