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Saturday, November 26, 2022

Germany issues ‘early warning’ of possible guest shortages as Russia threatens supplies

Moscow said last week it wanted to be paid in rubles, rather than US dollars or euros under existing gas supply contracts, and threatened to cut off supplies if that did not happen. The Kremlin’s claim was rejected by Germany and the G7 group of leading developed economies.

The German government said on Wednesday that the country had enough gas for the time being, but it encouraged all consumers – from companies to hospitals and households – to reduce their use as far as possible with immediate effect.

“There are currently no supply shortages,” Economy Minister Robert Habeck said in a statement. “Nevertheless, we must take further precautions to be prepared for any escalation by Russia.” German gas storage is currently filled to 25% capacity, he added.

The “early warning” is the first of three warning levels set out in Germany’s plan to manage gas supplies in a crisis. If the situation worsens, the government will declare an “alarm”, followed by an “emergency.” At that highest alert level, regulators can ration gas to maintain supplies to “protected customers” such as households and hospitals. Industrial users will be the first to experience cuts.

“This means that industrial production is lost, that supply chains are lost,” said Leonhard Birnbaum, CEO of the German Energy Group. E.ON (EONGY), according to Reuters, told public broadcaster ARD. “We are definitely talking about very heavy damage.”
Klaus Mueller, head of Germany’s energy market regulator, said in a tweet that Wednesday’s warning was aimed at avoiding a decline in gas supplies, but said consumers should be prepared for “all scenarios.”

A team of experts from the government, regulators, gas network operators and Germany’s 16 federal states have been convened to closely monitor the situation and take measures “to increase security of supply” if necessary, Habeck said.

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The European Union is dependent on Russia for about 40% of its natural gas, and Germany is Moscow’s largest energy customer on the continent. EU sanctions imposed on Russia over its invasion of Ukraine include a ban on new investment in energy projects, but do not target oil and gas exports.

Habeck said this week that payment in rubles was not acceptable to Berlin and he described Russian President Vladimir Putin’s demand as “extortion”.

Putin has given Russia’s central bank and Gazprom, the state-owned gas company, until Thursday to come up with proposals for accepting payments in rubles, rather than US dollars or euros as agreed in supply contracts.

With the sanctioned Russian central bank banned from exchanging euros and dollars for rubles, Moscow is trying to find a new stream of cash that it can easily spend.

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Putin can “directly finance the war, the army, the supply of soldiers, the supply of petrol for the tanks and the construction of weapons in his own country,” Habeck said on Monday.

The European Union plans to reduce Russian natural gas consumption by as much as 66% this year as it prepares for a complete break with its single largest energy supplier. But Europe would struggle to survive for long without Russian gas, and finding alternative sources presents a major logistical challenge. A recession will be anything but assured if Putin cuts off supplies.

The Netherlands – another of Russia’s major energy customers in Europe – said on Wednesday it would ask the public to use less natural gas in an effort to reduce its dependence on Moscow.

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However, the Dutch government will not implement its gas crisis plan, Tim van Dijk, spokesperson for the Ministry of Economy, told Nation World News. Instead, it hoped to reduce Dutch gas consumption through a campaign that appealed to its citizens.

The campaign has been in the works for weeks in light of the war in Ukraine and was not launched in response to Germany’s announcement, van Dijk added.

Charles Riley, Chris Stern and Benjamin Brown reported.

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