Russia says it is ready to supply Europe with gas, and has described persistent disruption fears as a “man-made crisis” created by Europe.
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Russia is preparing to temporarily shut down its Nord Stream 1 pipeline – the largest part of the European Union’s gas import infrastructure – for annual maintenance. The business has raised fears that further disruption to gas supplies would undermine the bloc’s efforts to prepare for winter.
Some fear the Kremlin will use the planned maintenance to turn off the taps for good.
Summer maintenance activities on the pipeline, which runs under the Baltic Sea from Russia to Germany, are course From July 11 to July 21.
It comes as European governments scramble to fill the underground storage with natural gas supplies in a bid to provide families with enough fuel to keep lights and homes warm during the winter.
The European Union, which receives nearly 40% of its gas through Russian pipelines, has been trying to quickly reduce its dependence on Russian hydrocarbons in response to President Vladimir Putin’s attack on Ukraine for months.
Klaus Muller, head of Germany’s energy regulator, told CNBC that Russia may continue to put pressure on gas supplies in Europe beyond the end of scheduled maintenance work.
Bundesnetzagentur’s Mueller said it is not expected that gas will be transported through the pipeline once the annual examination begins, adding: “We cannot rule out the possibility that gas transport will not resume after this for political reasons.”
Analysts at political risk advisory firm Eurasia Group agree.
If supply doesn’t return after maintenance because President Putin is playing games or wants to hit Europe while he’s in pain, the plan to fill gas stocks by the end of the summer likely won’t work,” Henning Gloesten, director of energy, climate and resources at Eurasia Group, told CNBC 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 main concerns for policy makers in the European Union and the energy sector more broadly is that they have “virtually no idea what’s going to happen” because most contacts with Gazprom are now disrupted, Gloustin said.
Previously it was relatively open and frequent until May.
Gas pipeline flowed from Russia to Europe A sharp focus over recent weeks, given growing fears of unrest.
Russia has reduced gas flows to Europe by about 60%, and it is not yet known when or whether Nord Stream 1 gas flows will return to normal levels. Gazprom cited delays in returning equipment served by German energy company Siemens in Canada due to its lower pipeline flows.
Kremlin spokesman Dmitry Peskov had earlier claimed that 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 Schulz are pictured during a weekly cabinet meeting on July 1, 2022.
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German Economy Minister Robert Habeck rejected the claim, saying Russia’s supply restrictions were a “political decision” aimed at destabilizing the region and increasing gas prices.
Late last month, Germany moved to the second so-called “alert level” in its gas emergency plan. The measure means Europe’s largest economy sees a high risk of long-term gas shortages, but believes the market can still manage the disruption without having to intervene.
Eurasia Group said that if Putin organizes a total cut-off of gas supplies after scheduled maintenance work on the Nord Stream 1 pipeline – in what Gloestin described as a “maximum economic war” scenario – Germany will likely have to move to the third level of its gas contingency plan. three-stage.
At this level, the German Bundesnetzagentur will have to decide how to distribute the gas supply nationwide.
‘Hot spot for the whole European Union’
“Germany has become a hotspot for the entire European Union,” said Gloesten. “Germany has the largest population in Europe, the largest economy, the largest gas consumer, the largest single importer of Russian gas, and has nine land borders. So, whatever happens in Germany spills over to the rest of Europe.”
Indeed, it is not only German authorities who are deeply concerned about the potential for further supply cuts.
And in Italy, the second largest buyer of Russian gas in the European Union, the government said last week it had loaned 4 billion euros ($4.2 billion) to state-owned Gestore dei Servizi Energetici to buy gas to boost stocks.
Germany, Italy, Austria and the Netherlands have indicated this Coal-fired plants could be used to offset disruption to Russian gas supplies.
“That’s why actually … we think Russia will come back a little bit,” Gloesten said. “They want a little bit of a bargaining chip in case the Europeans tighten sanctions so the Russians can retaliate with that.”
Russian President Vladimir Putin attends the 9th Forum of Russia-Belarus Regions via video link in Moscow, on July 1, 2022.
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Gloucestin said a complete shutdown of gas supplies via Nord Stream 1 for the rest of the year seems unlikely, particularly because such a move would run counter to Moscow’s own narrative.
The Kremlin has previously argued that the current drop in supplies is due to “technical factors” and economic sanctions.
Maintaining at least some of the flows would allow Russia to take advantage of higher prices and reserve the option of more drastic cuts later in the year, perhaps in response to the imposition of oil or gas price caps in the West, Gloesten said.
German network data show that in previous years, Russian gas flows through the Nord Stream 1 pipeline returned by the end of July after summer maintenance work.
Thomas Rodgers, European gas analyst at international consultancy ICIS, said he did not expect flows to stop completely — and noted separate maintenance work was completed on time.
“We don’t currently see any resolution to the presumed compressor issues that drove NS1 flows to such a low level, but we don’t expect a complete moratorium after this work is complete,” he told CNBC.
He added, “The recent work on the Turkstream pipeline, which transports Russian gas to southeastern Europe through the Black Sea and Turkey, was recently completed according to schedule and without further interruption.”