Russia has significantly reduced natural gas supplies to Europe in recent weeks, with flows through the Nord Stream 1 pipeline currently operating at only 20% of the agreed volume.
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European natural gas prices rose on Monday after Russia’s state energy giant Gazprom said it would shut down Europe’s largest gas infrastructure for three days from the end of the month.
Unscheduled maintenance works on the Nord Stream 1 pipeline, which runs from Russia to Germany via the Baltic Sea, deepening the gas dispute between Russia and the European Union and exacerbate both the risk of recession and winter shortages.
Gasoline price at the beginning of the month at the Dutch hub TTF, a European standard for natural gas trading, rose 19% on Monday, reaching 291.5 euros ($291.9) per megawatt-hour.
Contracts closed on Friday at a record high of 244.55 euros per megawatt hour, recording a fifth consecutive weekly gain.
Gazprom said Friday that the outage was due to the pipeline’s only remaining compressor in need of servicing. Gas flows through the Nord Stream 1 pipeline will be suspended for a period of three days from August 31 to September 2.
Gazprom said gas transmission will resume at a rate of 33 million cubic meters per day when maintenance work is completed “provided that no problems are identified.”
The announcement of the temporary closures comes as European governments scramble to fill underground storage facilities with natural gas supplies in an effort to have enough fuel to keep them going. warm homes in the coming months.
Russia has significantly reduced natural gas supplies to Europe in recent weeks, with flows through the Nord Stream 1 pipeline currently operating at only 20% of the agreed volume.
Moscow has previously blamed faulty equipment and delays for the dramatic drop in gas supplies.
However, Germany sees the supply cuts as a political move aimed at sowing uncertainty across the bloc and raising energy prices amid the Kremlin’s assault on Ukraine.
Two serious risks
Until recently, Germany bought more than half of its gas from Russia. And the governments of Europe’s largest economy are now battling to boost winter gas supplies amid growing concern that Moscow could soon turn off the taps altogether.
Moreover, Europe’s race to save enough gas takes place at a time when prices are skyrocketing. Rising energy costs are driving up household bills, pushing inflation to a multi-decade high and squeezing people’s spending power.
Holger Schmieding, chief economist at Berenberg Bank, said Gazprom’s latest announcement was a clear attempt to exploit Europe’s dependence on Russian gas.
“On its own, a short-term shutdown of the pipeline will not make a big difference, especially since Russia has already reduced gas exports through NS1 to 20% of capacity since the date of the shutdown,” Schmieding said. July 27,” Schmieding said in a research note.
“But it does highlight two serious risks: (i) Russia could falsely claim that it cannot reopen the pipeline afterwards because the ‘technical problem’ can only be resolved if its sanctions The West is dismantled and (ii) Russia can also shut down, he added.
Schmieding said higher prices for scarcer gas supplies would “exacerbate the severe recession that Europe is currently in” and warned an immediate Russian flow cut would increase Germany could face shortages in winter.
