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Germany Warns Of Gas Crisis After Russia Reduces Supply

Germany warned residents and businesses on Thursday that the country is in a natural gas crisis that could get worse in the coming months.

“The situation is serious, and winter is coming,” Robert Habeck, Germany’s economy minister, told reporters at a news conference in Berlin. He said the government had triggered the second phase of its three -step energy gas plan; the next stage will allow the government to start gas rationing.

“Even if you haven’t felt it yet: We’re in a gas crisis,” he said. “Gas is a limited commodity from now on. Prices are already high, and we need to be prepared for further increases. This will affect industrial production and be a huge burden for many consumers. ”

Last week, Russia’s state energy giant Gazprom reduced the amount of natural gas shipped to Germany by 60 percent, in what appears to be the latest move to punish Europe over sanctions and military support for Ukraine.

Gazprom has blamed reductions on turbines for compressor stations sent to Canada for repairs and not returned due to restrictions. But Mr Habeck called the Gazprom cuts a deliberate economic attack by Russian president Vladimir V. Putin.

“It is clearly Putin’s strategy to create insecurity, raise prices and divide us as a society,” he said.

Recent developments have raised concerns that the gas crisis is gaining dangerous momentum that could have unintended consequences for the wider economy, and that governments are not moving fast enough to stop it.

“We are one step further away from gas rations across Europe, which will affect many sectors, businesses and consumers,” said Biraj Borkhataria, an analyst at RBC Capital Markets, an investment bank. Policymakers seem to find themselves unable to act fast enough given the speed of events. ”

Mr Borkhataria said Russia’s actions in Germany could lead to “contagion and knock -on effects” across Europe as the gas market is connected. So, for example, restrictions on flows to Germany may affect prices in Britain.

Russia also inflicted financial damage to its corporate clients. One concern is that utilities that have contracts to buy gas from Gazprom will find themselves short of fuel and then have to buy additional supplies at higher prices to meet their obligations, leading to losses.

“Due to restrictions on the Nord Stream 1 pipeline, only much smaller quantities of gas now come from Russia, and replacements can only be obtained on the market at very high prices,” said Klaus-Dieter Maubach, chief executive of Uniper, a German utility , in a statement. Uniper said it only received 30 percent to 60 percent of the amount requested.

The shortage has pushed gas prices to unusually high levels, about six times higher than a year ago. Mr Habeck warned that such high prices were forcing energy suppliers to incur losses, which could threaten the entire energy market.

“If this push becomes so big that they can’t carry it anymore, the whole market is in danger of collapsing at some point,” Mr. Habeck said, describing in parallel how the collapse of Lehman Brothers triggered the global financial crisis.

Mr Maubach welcomed the government’s emergency plan as a “viable instrument” for dealing with the current gas situation, but warned that more extensive measures would be needed “if supply conditions remain like this or get worse.”

Since the end of March, when Germany entered the first phase of its plan, the government has focused on increasing its gas reserves, which are at more than 58 percent of capacity. But activating the second stage of the emergency plan means the government sees a high risk of long -term supply shortages.

The German government approved a 15 billion euro, or $ 15.7 billion, credit on Wednesday for utilities to buy natural gas to fill storage facilities. In addition, the government plans to start a program that will help the gas system cope by encouraging companies to stop using their gas temporarily. Unused fuel will then be made available to other industrial users for the cheapest price.

But the government decided not to allow gas suppliers to pass on soaring energy costs to customers, after businesses rejected the move.

German companies have been looking for alternative energy sources and ways to save gas, and Mr Habeck said they have been able to reduce its consumption by around 8 percent in recent weeks. The government has also passed legislation allowing utilities to restart coal-fired power plants that have either been shut down or are scheduled to be phased out. The Netherlands and Austria have taken similar steps.

Nord Stream 1, the main pipeline supplying Russian gas to Germany, is scheduled for regular maintenance for about two weeks starting July 11, when the flow will stop, raising concerns that Gazprom could take advantage of the situation to stop deliveries much longer.

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