Home Gas effect Germany braces for gas rationing amid ruble standoff with Russia

Germany braces for gas rationing amid ruble standoff with Russia

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BERLIN, March 30 (Reuters) – Germany on Wednesday triggered an emergency plan to manage gas supplies to Europe’s biggest economy, an unprecedented move that could see the government ration electricity in the event disruption or disruption of gas supplies from Russia.

The announcement is the clearest sign yet that the European Union is preparing for Moscow to cut off supplies to the region after President Vladimir Putin demanded that Europe and the United States pay for exports of gas in rubles.

The request, which was rejected by the G7 countries, is in retaliation for the West’s imposition of crippling sanctions on Russia for its invasion of Ukraine. Read more

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Moscow has not said when the currency change will take effect, but it is expected to unveil its ruble payment plans on Thursday. Russia’s top lawmaker warned on Wednesday that exports of oil, grain, metals, fertilizers, coal and timber could soon be priced the same. Read more

As a potential crisis looms, German Economy Minister Robert Habeck has activated the “early warning phase” of an existing gas contingency plan, meaning a team of crisis of the Ministry of Economy, the regulator and the private sector will monitor imports and storage.

Habeck told a press conference that Germany’s gas supplies were protected for the time being, but he urged consumers and businesses to reduce consumption, saying “every kilowatt-hour counts”.

“We need to increase precautionary measures to prepare for an escalation from Russia,” Habeck said. “With the declaration of the early warning level, a crisis team came together.”

If there is insufficient supply, the German grid regulator can ration the gas supply, with industry on the front line for cuts. Preferential treatment would be given to private households, hospitals and other critical institutions.

Half of Germany’s 41.5 million homes heat with natural gas while the industry accounted for a third of the 100 billion cubic meters of national demand in 2021.

‘EVERYTHING WILL BE ALRIGHT’

Europe was facing an energy crisis even before Russia invaded Ukraine and with gas storage levels in the EU currently at around 26% of total capacity. Governments are under pressure to bolster supply and protect consumers.

In France, the head of the energy regulator said the country should not face supply problems and said there was no need to panic.

“Everything will be fine, the gas storages are well filled, we will spend the winter”, declared Jean-François Carenco, the boss of the CRE, to BFM TV.

Russia is Germany’s biggest 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 independence total before mid-2024, according to Habeck.

Markets are eager to see how the dispute over Russia’s insistence on ruble payments plays out as European consumers grapple with soaring energy prices that have forced governments to announce measures tax relief.

Consumer prices in Spain rose nearly 10% year on year in March, their fastest pace since 1985.

“Gas markets are still anxiously waiting for clear ruble payment rules by Thursday,” Rystad Energy senior analyst Vinicius Romano said in a note.

“Both sides remain at odds over the prospect of changing the monetary terms of the dollar and euro contracts, waiting for the other side to blink first.”

After Habeck’s announcement, German one-year wholesale power hit a three-week high of 185 euros per megawatt-hour, up 6.3%.

Kerstin Andreae, head of the Federal Association of the Energy and Water Industry (BDEW), said Germany should have concrete plans in place outlining how the government would handle a shutdown in the delivery of gas that would force rationing measures.

“Now we need to take concrete steps to prepare for the emergency level, because in the event of a shutdown, things should go quickly,” Andreae said.

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Additional reporting by Holger Hansen; Editing by Christoph Steitz, John Stonestreet and Carmel Crimmins

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