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Germany moves a step closer to rationing gas after Russia cuts supplies

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By Euronews  with AP, AFP, Reuters
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The Industrial Park of Hoechst is pictured in Frankfurt, Germany, June 23, 2022. Germany activated the second phase of its three-stage emergency plan for natural gas.
The Industrial Park of Hoechst is pictured in Frankfurt, Germany, June 23, 2022. Germany activated the second phase of its three-stage emergency plan for natural gas.   -   Copyright  AP Photo/Michael Probst

Germany has activated the second phase of its three-stage emergency plan for natural gas supplies, saying the country faces a “crisis” and warning that storage targets for the winter are at risk due to dwindling deliveries from Russia.

The move brings the country closer to rationing measures, in the wake of a 60% drop in deliveries from Moscow via the Nord Stream 1 pipeline.

The government said the decision to raise the level to “alarm” follows the cuts to Russian deliveries made since June 14 and the continued high market price for gas. 

The economy ministry says the new measures allow for increased reliance on coal-fired power plants as well as an auction system to encourage industry to consume less.

In theory it would allow utilities to pass on soaring costs to customers to lower demand, but the ministry has stopped short of triggering this clause.

It says that while gas storage facilities are currently filled to 58% capacity — higher than at this time last year — the goal of reaching 90% by December won’t be achievable without further measures.

"The situation is serious and winter will come," Economy Minister Robert Habeck said in a statement.

“The reduction in gas supplies is an economic attack on us by (Russian President Vladimir) Putin,” he said. “We will defend ourselves against this. But our country is going to have to go down a stony path now.”

“Even if we can’t feel it yet: we are in a gas crisis,” Habeck added. 

The government said it had informed European partners of the move in advance.

The Russian group Gazprom blamed the 60% fall in gas deliveries to Germany via Nord Stream on a technical problem, blaming a delay in return of serviced equipment because of Western sanctions. 

But the German government says it is a "political decision", intended to influence the arm wrestling between Moscow and Western countries over the war in Ukraine.

This cut in supplies has had a heavy impact on several European countries, in particular Germany, Italy and France.

Last Sunday Germany announced a decision to use more coal to save gas, which accounted for 15% of the electricity produced in 2021.

The government will be able to "support" market players to cope with high prices, Habeck said. Berlin has announced the opening of a €15 billion credit line by state-owned KfW to finance gas purchases, via Trading Hub Europe, the body responsible.

The third and highest stage of Germany's plan is the “emergency” level, which would allow the state to organise rationing. Germany has been on stage one of its emergency plan since March, allowing for closer monitoring of gas flows and a focus on fillage storage facilities.

The standoff between Russia and the West following Vladimir Putin's move to wage war on Ukraine has exposed Europe's dependence on Russian gas supplies and sparked a race to find alternative energy sources.

The shift is particularly acute for Germany, Europe's largest economy, which has cultivated strong energy ties with Moscow stretching back to the Cold War.