Germany launched an emergency plan to manage gas supplies on Wednesday, which could bring the biggest economy in Europe if a controversy over Russia’s demand for ruble fuel disrupts or disrupts supplies. Moscow’s insistence on ruble payments for Russian gas covering one-third of Europe’s annual energy needs has galvanized others in Europe: Greece calls emergency supplier meeting, Dutch government says it will urge consumers to use less natural gas and the French energy regulator said consumers should not panic. The demand for rubles, which has been rejected by the G7 states, is in retaliation for the imposition of deadly sanctions by the West on Russia after its invasion of Ukraine. Moscow, which calls its actions in Ukraine a “special military operation”, says Western measures are tantamount to an “economic war”. Russia’s top lawmaker said Wednesday that Russia could increase demand for ruble payments in other commodities, such as oil, grain, fertilizer, coal and metals, increasing the risk of recession in Europe and the United States. States. Moscow is expected to announce its plans for ruble payments on Thursday, though it has said it will not immediately require buyers to pay for gas exports in the currency. Western countries have said paying in rubles would violate contracts that could take months or more to renegotiate, a prospect that has pushed commodity markets higher. It will also mitigate the impact of sanctions on Russia, strengthening the currency after it was hit by Western restrictions on Moscow’s access to its foreign exchange reserves. Berlin’s unprecedented move is the clearest sign so far that the European Union is preparing for Moscow to cut gas supplies unless it receives the ruble payment. Italy and Latvia have already activated the warnings. German Economy Minister Robert Habeck has implemented an “early warning phase” of an existing gas emergency plan, meaning a crisis team from the finance ministry, regulator and the private sector will monitor imports and storage. Habeck told a news conference that Germany’s gas supplies were currently guaranteed, but urged consumers and companies to cut consumption, saying “every kilowatt hour counts”. If supplies fall short, Germany’s grid regulator could accumulate gas, with the industry leading the way in cuts. Privileged treatment will be given to private households, hospitals and other critical institutions. Even without the threat of gas shortages, Germany could face a recession, and energy costs have already forced companies, including steel and chemical manufacturers, to cut production. German industry is at particular risk, the BDI said on Wednesday, calling for measures, including loans and state-owned subsidies, to prevent businesses from collapsing. This could cause industrial production to shrink by up to 9%, depending on the duration of any downtime, Deutsche Bank chief economist Eric Heymann told Reuters. The government’s board of financial advisers on Wednesday cut its growth forecast for this year by more than half to 1.8%. Half of Germany’s 41.5 million households are heated by natural gas, while industry accounted for a third of the 100 billion cubic meters of national demand in 2021. Russia is Germany’s top gas supplier, accounting for 40% of imports in the first quarter of 2022. Berlin has pledged to end its energy dependence on Moscow, but will not achieve full independence by mid-2024. according to Habeck. Europe faced an energy crisis even before Russia invaded Ukraine. Gas storage levels in the European Union are around 26 percent of total capacity, below normal levels at this time of year. The European Commission, which said Wednesday it would work closely with Member States to prepare for gas shortages, has proposed legislation requiring countries to cover levels of at least 80% by November, but that would be almost impossible if Russia stops supplies. The goal of filling the storage would not be the case if the European Commission declared a state of emergency for gas supply across the EU or at regional level – which it could do if at least two countries first declared a state of emergency. Jean-François Carenco, head of the energy regulator in France, which is much less dependent on Russian gas from Germany because of pipelines and liquefied natural gas from other sources and the dominance of nuclear power for production, said that the country must not face supply issues. “Everything will be fine, the gas storage facilities are well stocked, we will be able to spend the winter,” he told BFM TV. Greece was scheduled to hold an emergency meeting of the energy regulator, the gas carrier and major gas and energy suppliers on Wednesday to assess security of supply in the event that Russia cuts off supplies. The Dutch government has said it will launch a campaign to get consumers to use less gas. Investors are watching to see how the dispute over Russia’s insistence on ruble payments unfolds as consumers in Europe struggle with energy prices that have forced governments to announce fiscal easing measures. This month was the most expensive month for electricity prices in European history, although markets are set to end the month at a lower level than in early March. Following Germany’s announcement, German wholesale electricity for next year raised a three-week high to 185 euros per megawatt-hour, an increase of 6.3%. Kerstin Andreae, head of the Federal Energy and Water Industry Association (BDEW), said Germany should have clear plans on how the government would deal with a forced gas cut-off. “We now need to take concrete steps to prepare for the emergency level, because in the event of an outage things will have to move fast,” Andreae said. Be smart with your money. Receive the latest investment information delivered directly to your inbox three times a week with the Globe Investor newsletter. Register today.
