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Russia deepens Europe's energy squeeze with new gas halt

Stock Markets Aug 31, 2022 10:50AM ET
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© Reuters. FILE PHOTO: Pipes at the landfall facilities of the 'Nord Stream 1' gas pipeline are pictured in Lubmin, Germany, March 8, 2022. REUTERS/Hannibal Hanschke
 
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By Christoph Steitz and Nina Chestney

FRANKFURT/LONDON (Reuters) - Russia halted gas supplies via Europe's key supply route on Wednesday, intensifying an economic battle between Moscow and Brussels and raising the prospects of recession and energy rationing in some of the region's richest countries.

European governments fear Moscow could extend the outage in retaliation for Western sanctions imposed after it invaded Ukraine and have accused Russia of using energy supplies as a "weapon of war". Moscow denies doing this and has cited technical reasons for supply cuts.

Russian state energy giant Gazprom (MCX:GAZP) said Nord Stream 1, the biggest pipeline carrying gas to its top customer Germany, will be out for maintenance from 0100 GMT on Aug. 31 to 0100 GMT on Sept. 3.

The president of the German network regulator said that Germany would be able to cope with the three-day outage as long as flows resumed on Saturday.

"I assume that we will be able to cope with it," Klaus Mueller told Reuters TV in an interview. "I trust that Russia will return to at least 20% from Saturday, but no one can really say."

Further restrictions to European gas supplies would deepen an energy crunch that has already triggered a 400% surge in wholesale gas prices since last August, squeezing consumers and businesses and forcing governments to spend billions to ease the burden.

In Germany, inflation soared to its highest in almost 50 years in August and consumer sentiment soured as households brace for a spike in energy bills.

LOWER SUPPLIES

Unlike last month's 10-day maintenance for Nord Stream 1, the latest work was announced less than two weeks in advance and is being carried out by Gazprom rather than its operator.

Moscow, which slashed supply via the pipeline to 40% of capacity in June and to 20% in July, blames maintenance issues and sanctions it says prevent the return and installation of equipment.

Kremlin spokesman Dmitry Peskov said on Wednesday that Russia remained committed to its gas supply obligations, but was unable to fulfil them due to the sanctions, according to the Interfax news agency.

Gazprom said the latest shutdown was needed to perform maintenance on the pipeline's only remaining compressor at the Portovaya station in Russia, saying the work would be carried out jointly with Siemens specialists.

Siemens Energy, which has carried out maintenance work on compressors and turbines at the station in the past, said on Wednesday it was not involved in the maintenance but stood ready to advise Gazprom if needed. Russia has also stopped supplying Bulgaria, Denmark, Finland, the Netherlands and Poland, and reduced flows via other pipelines since launching what Moscow calls its "special military operation" in Ukraine.

Gazprom said on Tuesday it would also suspend gas deliveries to its French contractor because of a payments dispute, which France's energy minister called an excuse, but added that the country had anticipated the loss of supply.

German Economy Minister Robert Habeck, on a mission to replace Russian gas imports by mid-2024, earlier this month said Nord Stream 1 was "fully operational" and there were no technical issues as claimed by Moscow.

'ELEMENT OF SURPRISE'

The reduced flows via Nord Stream have complicated efforts across Europe to save enough gas to make it through the winter months, when governments fear Russia may halt flows altogether.

"It is something of a miracle that gas filling levels in Germany have continued to rise nonetheless," Commerzbank (ETR:CBKG) analysts wrote, noting the country has so far managed to buy enough at higher prices elsewhere.

In the meantime, some Europeans are voluntarily cutting their energy consumption, including limiting their use of electrical appliances and showering at work to save money while companies are bracing for possible rationing.

With storage tanks filled in 83.65%, Germany is already close to its 85% target set for Oct. 1, but it has warned reaching 95% by Nov. 1 would be a stretch unless companies and households slash consumption.

European Union as a whole reached 80.17% of its storage capacity, already ahead of the 80% target set for Oct. 1, when the continent's heating season starts.

Analysts at Goldman Sachs (NYSE:GS) said their base scenario was that the latest Nord Stream 1 outage would not be extended.

"If it did, there would be no more element of surprise and reduced revenues, while low flows and the occasional drop to zero have the potential to keep market volatility and political pressure on Europe higher," they said.

(Reporting Nina Chestney and Christoph Steitz; Additional reporting by Matthias Inverardi, Bharat Govind Gautam and Eileen Soreng; Editing by Veronica Brown, Carmel Crimmins, Lincoln Feast and Tomasz Janowski)

Russia deepens Europe's energy squeeze with new gas halt
 

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Comments (8)
Johnny Crash
Johnny Crash Aug 31, 2022 3:32PM ET
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Hahaha, beautiful! Voters will punish the green mafia at the next elections
Vito Tagliano
Vito Tagliano Aug 31, 2022 9:38AM ET
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$EQT should be in business!
Cody Hawkins
Cody Hawkins Aug 31, 2022 9:36AM ET
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No one seems to have any sense of basic economics or geopolitics. BRICS countries are aggressively reselling Russian oil and gas to Europe at a premium. They throw a new "Made in" label on it and pump up the premiums and Europe takes it hook line and sinker. I thought the west would have played this smarter. This comment section shows me how naive we really are.
Show previous replies (6)
First Last
First Last Aug 31, 2022 9:36AM ET
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We can call Maduro a Na zi so countries like Russia & China can't complain.
Ken Roth
Ken Roth Aug 31, 2022 9:36AM ET
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First Last good idea but unfortunately we would then be no better than putin and would only support his cause for fighting against the na..zi usa
Ken Roth
Ken Roth Aug 31, 2022 9:36AM ET
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Cody good to be wize when history has already happened but unhelpfull…not many thought that putin would be that mad…but never underestimate a vicemayor of skt. Petersbourg…lessons learned…
First Last
First Last Aug 31, 2022 9:36AM ET
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Ken Roth    If Russia & China keep pushing for WW III, the US needs there to be no enemy military bases in North/South America, and for the US and its allies/free world to be energy independent.  And it's not like Maduro's regime is legitimately elected or Constitutional or has popular support.
Joeri Willems
Jurinho Aug 31, 2022 9:36AM ET
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break their incone? prices went up tenfold and they sell to their allies at 40% discount. No pain, but serious gain, plus countries like Turkey and Hungary get closer to the Russia side. Not good for Europe, not good. They got into this mess with idiot politics and too much focus on the wrong things. EU is in selfdestruction mode and no good news possible. Unless they go to war. But no armies and their extreme green left ideology makes that impossible. So they let Ukrain fight alone and choose a slow 5y financial path to death.
Ken Roth
Ken Roth Aug 31, 2022 9:14AM ET
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Europe do no longer need Russian gas they can purchase LNG from US and many places in the world. LNG recipient terminals are currently being built all along Europe coastline, Northsee gas from scandinavia will be feeding into Europe in 6 months according to Totale. Putin has dropped his biggest clients and Russian strategy is to make sure that anybody but Russia makes money...that should support Russian economy....
gab nea
gab nea Aug 31, 2022 7:08AM ET
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the low intelligence maga crazies cannot defend lying trump, so they resort to insults, how childish!
gab nea
gab nea Aug 31, 2022 6:50AM ET
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the trump-like putin says its pipeline maintenance, wink, wink! they lie like dogs! vote Republicans to the curb!
gab nea
gab nea Aug 31, 2022 6:50AM ET
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deez nutzz , you did not say trump doesn't lie! you agree then that he is a lying sleaze, no ?
Benjamin USA
Benjamin USA Aug 31, 2022 6:50AM ET
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deez nutzz triggered cuck lmao keep deep ********trump hahahaa so sad
Ken Roth
Ken Roth Aug 31, 2022 6:50AM ET
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deez nutzz  I suggest you give Trump all your money to his rip off fund for suckers who wants to pay for his lawyer fees he is going to need every cent you have to keep out of jail.
First Last
First Last Aug 31, 2022 6:50AM ET
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Russia lies, again.  "pipeline maintenance" doesn't seem to have adversely affected Russia's energy export to non-EU countries.
Anonymous Anonymous
Anonymous Anonymous Aug 31, 2022 4:56AM ET
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Seems Russia lost this round... But their economy's still strong enough to last at least 2 years sanctions...Who'll win the economic war?
Ken Roth
Ken Roth Aug 31, 2022 4:56AM ET
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We have been here before last time was Russias invasion of afghanistan that costed the sovjet union, wonder what the costs will be this time....
Ken Roth
Ken Roth Aug 31, 2022 2:22AM ET
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Great day....Putin now has 0 leverage over Europe with 0% Russian gas being delivered and bought in Europe.....US and Canada will supply LNG to Europe to ensure that the GAS stocks are filled suffiently to the winter....US thanks Russia for all the Billions of dollars we get everyday that would normally have gone to Russia.
Benjamin USA
Benjamin USA Aug 31, 2022 2:22AM ET
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deez nutzz its a win for capitalism, are you a commie?
 
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