5.7 C
New York
9.4 C
Washington D.C.
Sunday, February 5, 2023

Nord Stream 1: what happens from Thursday?


Status: 07/20/2022 08:07

Previous pretexts from Russia do not indicate that gas supplies via Nord Stream 1 will return to normal from Thursday. What’s the closest thing to expect?

By Detlev Landmesser, tagesschau.de

Even before July 11, when maintenance of Nord Stream 1 began, experts expressed legitimate concern that Moscow could use the ten days of work on the main gas pipeline to Germany to continue to restrict supply. in gas – or even stop them altogether.

In fact, the Russian state company Gazprom had previously cut deliveries via Nord Stream 1 by 60%. So tomorrow, Thursday, there will be an oath. What could happen – and what would be the most likely consequences?

Scenario 1: Russia returns to normal

The scenario that can normally be expected is also the most unlikely: Russia would increase the delivery quantity to return to the contractually agreed normal level once the maintenance is completed. This would allow Germany to conveniently fill its gas storage facilities ahead of winter and even make provisions for later cold spells.

However, this “Goldilocks scenario” can be ruled out. Russia could then make good use of the abundant funds flowing in from the West; the Kremlin is aware, however, that the West Europeans’ ability to act increases with each additional percent in their gas storage facilities – to the point of being able to one day impose a gas embargo themselves, as they did it with coal and oil.

Regarding maintenance work, Moscow stresses that Russia wants to continue to fulfill its obligations in the future. However, recent Gazprom maneuvers cast doubt on this message. The public company justified its delivery volumes, which have been strangled since mid-June, by “force majeure”, which the largest German gas importer Uniper immediately rejected. According to the Federal Ministry of Economics, the repeated reference to the Siemens Energy gas turbine, which has not yet been returned, is also an excuse: “It is a replacement turbine. Nevertheless, we are doing our utmost possible to use this pretext,” a ministry spokeswoman said Monday.

Federal Network Agency Chairman Klaus Müller said Russia could increase delivery volumes via Ukraine at any time in order to meet its contractual obligations. “But Vladimir Putin clearly lacks political will.”

Scenario 2: deliveries are still delayed

It is therefore more likely that the Kremlin will continue to maneuver and delay for a certain period or indefinitely. The gas turbine mentioned would be the most obvious reason in the short term. According to Russian newspaper Kommersant, it could take until next Sunday for the turbine, long held back by Canada after maintenance due to sanctions, to arrive in Russia – provided there are no problems logistics or customs.

Scenario 3: deliveries are completely stopped

The most difficult scenario would be a complete halt in deliveries via Nord Stream 1 – either with new justifications or without an explanation from Gazprom. It is also conceivable that Moscow, in violation of the contract, will impose new conditions on new gas deliveries that customers cannot or will not meet.

If only because of the natural gas price shock that can then be expected, most experts are assuming a recession in Germany in this case. If one follows the calculations of the Federal Network Agency, a “gas shortage” could hardly be avoided in this case. Ultimately, the consequence would be the restriction of gas volumes for industry.

A current joint diagnosis by four leading German economic research institutes, on the other hand, concludes that there is no longer any risk of gas bottlenecks even if deliveries from Russia are stopped this year. However, these calculations are subject to large uncertainties. The experts, who calculated at least 1,000 scenarios, had to take into account a number of variables – including the evolution of domestic consumption, the transport of gas to European partners and the pace of construction of liquefied gas terminals .

However, there are two reasons in particular against a complete halt to deliveries. First, the Russian state urgently needs gas export money in order to remain able to act in the current economic crisis and to continue financing the war in Ukraine.

Second, such a breach of contract would send a devastating signal to other buyers of Russian gas, such as China or Turkey. It is already evident that the energy superpower is using oil and gas as political weapons. Any other arbitrary act would further undermine Russia’s credibility as a reliable partner.

Scenario 4: Russia supplies significantly reduced quantities

A continuation of the Kremlin’s dual strategy remains likely so far: on the one hand, a resumption of gas supplies to some extent in order to lighten the state budget. At the same time, however, the attempt to exert maximum political pressure with energy weapon gas.

For Germany, this would mean that it would have to worry about an energy crisis for the foreseeable future and that prices would continue to rise. Even efforts to obtain gas from other sources such as liquefied natural gas (LNG) and through new partnerships like with Azerbaijan and Egypt will not be able to fully end Germany’s dependence on vis-à-vis Russian gas in the years to come. The Ministry of Economy aims to reduce the share of Russian gas deliveries to around 30% by the end of the year. By summer 2024, the federal government estimates that this proportion may drop to ten percent of consumption. In 2021, the share of Russian gas deliveries was still 55%.

The race against time to fill the gas storage tanks would therefore remain open, but with a realistic chance.

According to the Energy Storage Law passed in March, storage facilities should be 80% full by October 1 and 90% full by November 1 to ensure uninterrupted gas supply for the coming winter. According to the Federal Network Agency, the fill level of all storage systems is currently 65.1%. It is therefore above the level of the past year, but remains a good four percentage points below the average of the last five years. However, if the current fill rate could be maintained, the desired target values ​​would be achievable.

For consumers, the prospect remains that they will probably not have to freeze this winter. But you will definitely have to dig deeper into your pockets. “Companies and private consumers must be prepared for a significant increase in gas prices,” writes the Federal Network Agency in its current management report.


Source www.tagesschau.de

Latest article