Germany risks recession as Russian gas crisis deepens

Pipes on the landfall amenities of the ‘Nord Stream 1’ fuel pipeline are pictured in Lubmin, Germany, March 8, 2022. REUTERS/Hannibal Hanschke/File Picture

BERLIN/COPENHAGEN, June 21 (Reuters) – Germany faces sure recession if already faltering Russian fuel provides utterly cease, an business physique warned on Tuesday, as Italy stated it might contemplate providing monetary backing to assist firms refill fuel storage to keep away from a deeper disaster in winter.

European Union international locations from the Baltic Sea within the north to the Adriatic coast within the south have been outlining measures to deal with a provide disaster after Russia’s invasion of Ukraine put power on the coronary heart of an financial battle between Moscow and the West.

The EU relied on Russia for as a lot as 40% of its fuel wants earlier than the warfare – rising to 55% for Germany – leaving an enormous hole to fill in an already tight international fuel market. Some states have quickly reversed plans to close coal energy vegetation in response. learn extra

World fuel costs have sky-rocketed, driving surging inflation larger nonetheless and creating a much bigger headache for coverage makers making an attempt to haul Europe again from an financial precipice.

Germany’s BDI business affiliation slashed its financial progress forecast for 2022 on Tuesday to 1.5%, revising it down from 3.5% anticipated earlier than the warfare. It stated a halt in Russian fuel deliveries would make recession inevitable. learn extra

Russian fuel remains to be being pumped through Ukraine however at a lowered price and the Nord Stream 1 pipeline beneath the Baltic, a significant provide path to Germany, is working at simply 40% capability, which Moscow says is as a result of Western sanctions are hindering repairs. Europe says this can be a pretext to cut back flows.

The slowdown has hampered Europe’s efforts to refill storage amenities, now about 55% full, to fulfill an EU-wide goal of 80% by October and 90% by November, a degree that will assist see the bloc by way of winter if provides slowed additional or have been halted.

Italian Ecological Transition Minister Roberto Cingolani stated Italy have to step up its refilling efforts and stated Rome wanted to contemplate the best way to assist firms fund purchases of fuel for storage.

An Italian authorities supply stated a state assure was a possible choice to assist decrease the price of financing.

“Fuel at the moment is so costly that operators can not put cash into it,” Cingolani stated. learn extra

The benchmark fuel worth for Europe was buying and selling round 123 euros ($130) per megawatt hour (MWh) on Tuesday, beneath this 12 months’s peak of 335 euros however nonetheless up greater than 300% on its degree a 12 months in the past.

EARLY WARNING

Italy, alongside others reminiscent of Germany, Denmark, Austria and the Netherlands, has activated the primary early warning stage of its three-stage plan to deal with a fuel provide disaster.

As a part of Germany’s contingency plans, the Bundesnetzagentur fuel regulator unveiled particulars of a brand new public sale system to begin in coming weeks, aimed toward encouraging producers to devour much less fuel.

However regulator stated it was not time to declare an all-out emergency, or the third stage of its disaster plan, that will see the nation ration fuel to business to guard very important providers and households.

“I’m very a lot in favour of rigorously analyzing when the correct time is for the very best alert degree,” Bundesnetzagentur chief Klaus Mueller advised German broadcaster BR.

The sky-high European worth has attracted extra LNG cargoes, however Europe lacks the infrastructure to fulfill all its wants from LNG, whereas the worldwide LNG market is already stretched.

Disruptions to a serious U.S. producer of liquefied pure fuel that supplied shipments to Europe add to the problem.

Europe is in search of extra pipeline provides from its personal producers, reminiscent of Norway, and different states, reminiscent of Azerbaijan, however most producers are already pushing on the limits of output.

Because the disaster extends throughout Europe, even a small shopper like Sweden has joined European allies in in triggering the primary stage of its power disaster plan. learn extra

The state power company stated on Tueday that provides remained strong however its newest transfer signalled “to business gamers and fuel customers related to the western Swedish fuel community, that the fuel market is strained and a deteriorating fuel provide scenario could come up.”

Sweden, the place fuel accounted for simply 3% of power consumption in 2020, will depend on piped fuel provides from Denmark, the place storage amenities at the moment are 75% full. Denmark activated the primary stage of its emergency plan on Monday.

($1 = 0.9470 euros)

Reporting by Rachel Extra and Paul Carrel in Berlin, Stine Jacobsen in Copenhagen, Nina Chestney in London, iuseppe Fonte and Francesca Landini in Rome; Modifying by Edmund Blair and Carmel Crimmins

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