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Germany declares gas crisis as Russia cuts supplies to Europe

<i>Christian Mang/Reuters</i><br/>German Economy Minister Robert Habeck gives a statement on the topics of energy and security of supply
Christian Mang/Reuters
German Economy Minister Robert Habeck gives a statement on the topics of energy and security of supply

By Nadine Schmidt and Mark Thompson, CNN Business

Europe’s biggest economy is now officially running short of natural gas and is escalating a crisis plan to preserve supplies as Russia turns off the taps.

Germany on Thursday activated the second phase of its three-stage gas emergency program, taking it one step closer to rationing supplies to industry — a step that would deliver a huge blow to the manufacturing heart of its economy.

German economy minister Robert Habeck said he hoped rationing wouldn’t be necessary to get through the coming winter, but couldn’t rule it out.

”Gas is from now on in short supply in Germany,” he told reporters at a press conference in Berlin. “Even if you don’t feel it yet: We are in a gas crisis.”

Europe’s energy crisis escalated this month as Russia further reduced supplies to Germany, Italy and other members of the European Union.

Russia’s state gas company Gazprom slashed flows through the Nord Stream 1 pipeline to Germany by 60% last week, blaming the move on the West’s decision to withhold vital turbines because of sanctions. Italian energy giant ENI said Gazprom was cutting its supplies by 15%.

Twelve EU countries have so far been affected by Russian gas supply cuts, the bloc’s climate policy chief Frans Timmermans said on Thursday.

“Russia has weaponized energy, and we have seen further gas disruptions announced in recent days. All this is part of Russia’s strategy to undermine our unity,” Timmermans told EU lawmakers.

“So the risk of full gas disruption is now more real than ever before,” he stressed.

Kremlin spokesman Dmitry Peskov said Thursday that cuts in Russian gas supplies to Europe were a result of technical issues, rather than political reasons, adding there was “no hidden agenda.”

‘Economic confrontation’

Habeck called on all consumers — industry, households and public institutions — to reduce their consumption as much as possible “so that we can get through the winter.”

European natural gas futures prices have soared by about 60% since the middle of this month to trade around €133 ($140) per megawatt hour (MWh), levels last seen in March, according to data from the Intercontinental Exchange.

Habeck said while German gas storage facilities are 58% full — higher than at this time last year — the goal of reaching 90% by December won’t be achievable without further measures.

“We are in an economic confrontation with Russia,” Habeck said.

Gazprom’s recent throttling of gas flows comes after it had already cut off supplies to Poland, Bulgaria and Finland, and to energy companies in Denmark, Germany and the Netherlands, because of their refusal to comply with the Kremlin’s demand to be paid in rubles.

Turning to coal

Germany, Austria and other EU countries are now turning to coal and oil-fired power stations so more gas can be diverted into storage for heating homes during the winter.

Europe has tried to reduce its reliance on Russian natural gas since the invasion of Ukraine in late February. Germany has managed to reduce Moscow’s share of its imports to 35% from 55% before the start of the war.

But its options for finding alternative supplies took a knock last week when a major US producer of liquified natural gas said that its facility in Texas would be shut completely for 90 days after a fire broke out. Freeport LNG has produced about one fifth of US LNG exports so far this year, according to analytics firm Vortexa.

Germany activated the first “early warning” phase of its emergency energy program back in March. The “alarm” phase declared Thursday would be followed by an “emergency” if the situation deteriorates further. At that highest state of alert, regulators can ration gas to maintain supplies to “protected customers” such as households and hospitals. Industrial users would be the first to face cuts.

— Anna Cooban, Sharon Braithwaite, James Frater, Anna Chernova and Benjamin Brown contributed to this article.

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