New Russia gas halt tightens energy screws on Europe

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

FRANKFURT/LONDON, Aug 31 (Reuters) – Russia halted fuel provides through a significant pipeline to Europe on Wednesday, intensifying an financial battle between Moscow and Brussels and elevating the prospects of recession and power rationing in a number of the area’s richest nations.

The outage for upkeep on Nord Stream 1 implies that no fuel will movement to Germany between 01:00 GMT on Aug. 31 and 01:00 GMT on Sept. 3, based on Russian state power big Gazprom (GAZP.MM).

Information from entry factors linking Nord Stream 1 to the German fuel community through the Baltic Sea confirmed flows fell to zero early on Wednesday. Information from the Nord Stream 1 operator’s web site confirmed flows drastically down for 0300-0400 CET (01:00-02:00 GMT) from an hour earlier. learn extra

European governments concern Moscow may lengthen the outage in retaliation for Western sanctions imposed on it after its invasion of Ukraine and have accused Russian President Vladimir Putin of utilizing power provides as a “weapon of conflict”. Moscow denies doing this.

Additional restrictions to European fuel provides would heighten an power crunch that has already despatched wholesale fuel costs hovering over 400% since final August, making a painful cost-of-living disaster for shoppers and companies and forcing governments to spend billions to ease the burden. learn extra

In contrast to final month’s 10-day upkeep for Nord Stream 1, the upcoming work was introduced lower than two weeks prematurely and is being carried out by Gazprom not Nord Stream AG, specializing in the final working turbine on the station.

Moscow, which slashed provide through Nord Stream 1 to 40% of capability in June and to twenty% in July, blames upkeep points and sanctions it says stop the return and set up of apparatus.

Gazprom stated the most recent shutdown is required to carry out upkeep on the pipeline’s solely remaining compressor.

But Russia has additionally reduce off provide to Bulgaria, Denmark, Finland, the Netherlands and Poland utterly, and diminished flows through different pipelines since launching what Moscow calls its “particular army operation” in Ukraine. learn extra

“Given occasions over latest months, we predict the market might disregard Gazprom’s feedback and begin to think about whether or not the pipeline might not return to service, or on the very least might (be) delayed for any given motive,” stated Biraj Borkhataria, Affiliate Director of European Analysis at Royal Financial institution of Canada.

‘ELEMENT OF SURPRISE’

German Economic system Minister Robert Habeck, on a mission to interchange Russian fuel imports by mid-2024, earlier this month stated Nord Stream was “totally operational” and there have been no technical points as claimed by Moscow.

Klaus Mueller, president of Germany’s community regulator, stated whereas a resumption of flows would assist Germany’s safety of provide, nobody was in a position to say what the results could be if flows remained at zero. learn extra

Europe’s largest economic system is making higher progress than anticipated in filling its fuel storage amenities, however it’s not sufficient to get the nation by winter, he stated.

The diminished flows through Nord Stream have difficult efforts throughout Europe to replenish very important fuel storage amenities, a key strategic objective to make it by the winter months, when governments concern Russia might halt flows altogether.

“It’s one thing of a miracle that fuel filling ranges in Germany have continued to rise nonetheless,” Commerzbank analysts wrote, including Germany had thus far been profitable at shopping for enough volumes at greater costs elsewhere.

Within the meantime, nonetheless, some Europeans are voluntarily chopping their power consumption, together with limiting their use {of electrical} home equipment and showering at work to economize whereas firms are bracing for potential rationing. learn extra

At 83.26%, Germany is already inside attain of an 85% goal for its nationwide fuel storage tanks by Oct. 1, however it has warned reaching 95% by Nov. 1 could be a stretch until firms and households drastically reduce consumption.

For the European Union as a complete, the present storage degree is 79.94%, simply wanting an 80% goal by Oct. 1, when the continent’s heating season begins.

Analysts at Goldman Sachs stated their base case assumption was that this outage wouldn’t be prolonged.

“If it did, there could be no extra factor of shock and diminished revenues, whereas low (Nord Stream 1) flows and the occasional drop to zero have the potential to maintain market volatility and political stress on Europe greater,” they stated.

Reporting Nina Chestney and Christoph Steitz; Further reporting by Matthias Inverardi, Bharat Govind Gautam and Eileen Soreng; Enhancing by Veronica Brown, Carmel Crimmins and Lincoln Feast.

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