The Ukraine Crisis: Germany Considers Natural-Gas Rationing

 

"BERLIN -- The German government moved closer to rationing natural gas on Thursday after Russia cut deliveries to the country last week in an escalation of the economic war triggered by sanctions on Russia.

Berlin triggered the second step of its three-step plan to deal with gas shortages after Kremlin-controlled energy giant Gazprom, the country's biggest gas exporter, throttled delivery via the Nord Stream pipeline by around 60% last week. Germany's gas reserves are at 58% capacity, and the government now expects a gas shortage by December if supplies don't pick up, Economy Minister Robert Habeck said.

The second step, dubbed the "alarm level," is a prerequisite for the government to enforce some of the gas-saving measures it announced over the weekend, including substituting coal to gas for power generation and creating financial incentives for companies that consume less gas.

Rationing, which would come in the third step, would focus on industry and could severely affect companies that use gas as fuel or as a raw material for production, likely pushing Europe's biggest economy into recession, economists and company executives have warned.

Germany grew heavily dependent on Russian gas flowing through pipelines over decades and has struggled to diversify supplies. It is now scrambling to build new infrastructure to switch to liquefied natural gas delivered by ships. That transition is costly and takes time, making a temporary shortage this winter increasingly likely.

Under German law, strategic gas reserves must be 80% full by October and 90% by November -- a scenario unlikely to be met. When the government triggers the third level of the plan, known as the "emergency phase," the country's energy regulator can begin to ration gas.

"We have a disruption of the gas supply in Germany. . .as of now gas is in short supply," Mr. Habeck said Thursday.

The minister said he couldn't rule out that gas rationing for industry would eventually have to be introduced, but said this would likely be avoided due to other measures being put in place by his government.

Mr. Habeck called on consumers, who are initially protected from rationing by law, and industry to start saving gas, which residential users use mainly for heating, and said energy prices would keep rising, warning that "winter is coming -- we must do what's necessary now."

The market is still able to provide enough gas at the moment, he said, but he warned that the government had to act because of shortage of fossil fuels, which could eventually make the cost of gas prohibitively expensive for some companies, forcing them to shut down or relocate.

Energy providers and some of their customers could face insolvency if gas prices continue to rise as expected, experts have warned. The government has passed legislation that would make it easier for them to pass on price increases to customers.

"We are ready to support Ukraine and defend freedom, and there will be a price to pay for that. . . . What we are doing here is a collective effort," said Mr. Habeck, who has called Moscow's throttling of gas supplies an economic attack on Germany by Russian President Vladimir Putin.

Moscow has blamed the shortfall on missing turbine parts stuck in Canada due to Western sanctions. European officials have dismissed the explanation and called the restrictions a political move to put pressure on Europe and retaliate for the sanctions.

The Kremlin dismissed Berlin's accusations on Thursday and said Moscow remains a "reliable" supplier of natural gas. "Our German counterparts are well aware of all technological cycles of gas pipeline maintenance . . . so it's strange to call it politics," the Kremlin's spokesman Dmitry Peskov said.

Supplies could fall further as the Nord Stream pipeline linking Russia to Germany is due for a scheduled maintenance closure on July 11. The closure would normally be for just over 10 days but analysts and officials are concerned the pipeline may not reopen at all.

Russia's throttling of gas supplies has raised fears across Europe that several nations could be faced with a fuel shortage in the winter. It has also increased gas prices, putting additional pressure on economies already struggling with high inflation." [1]

Beloved by the people Mother Merkel, careful previous ruler of Germany, has to be quietly laughing at today's German ruling coalition "heroes" who forgot the interests of Germany's people trying to show off ruling coalition's heroism in Facebook posts. 

1.  The Ukraine Crisis: Germany Considers Natural-Gas Rationing
Pancevski, Bojan; Kantchev, Georgi. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 24 June 2022: A.9.