EUROPE is bracing itself for an energy crisis this winter after approval for Russia’s controversial gas pipeline into Germany was suspended by regulators.
Gas prices shot up again on Wednesday as traders reacted to the news, with UK natural gas futures up 17 per cent on the day and the European benchmark also spiking by just shy of 15 per cent.
Energy bigwigs are now warning of power shortages if the continent is hit by a particularly miserable winter.
Jeremy Weir, CEO of commodities giant Trafigura said: “We haven’t got enough gas at the moment quite frankly, we’re not storing for the winter period. So hence there’s a real concern that there’s a potential if we have a cold winter that we could have rolling blackouts in Europe.”
One London-based trader yesterday told City A.M. that while the UK appeared more resilient, there are fears here too that a return of weather phenomena like 2018’s ‘Beast from the East’ would push supplies to the limit.
Fears were increased on the continent yesterday by the Nord Stream 2 delay.
Plans to certify the already constructed 759-mile Kremlin-backed pipeline have been put on hold as it does not meet EU and German laws requiring operators and suppliers to be owned separately.
The decision is a huge blow to Russian President Vladimir Putin who is aiming to boost the country’s already vast influence over Europe’s energy supply.
The country is already responsible for over a third of Europe’s natural gas imports, and the new £8.4bn pipeline will double its gas exports to Germany. The pipeline could also reduce Ukraine’s long-term importance to Europe.
In the UK, the hike in wholesale prices – which cannot be passed on to consumers due to the energy price cap – claimed another two victims yesterday, with Neon Reef and Solar Energy, with a combined 35,000 customers, both exiting the market.
Geopolitical tensions grow as gas supply shortens
The suspension of the pipeline follows continued supply disruption between EU and Russia, with Gazprom only providing piecemeal increases in gas over recent week.
Gas flows in the Yamal-Europe pipeline even moved eastwards for a three day spell last month, while supplies entering Europe at a snail’s pace over recent months.
Russian President Vladimir Putin has previously dismissed claims that Russia is rationing supplies to put pressure on Germany to approve Nord Stream 2 as “politically motivated blather”.
He has also called on Gazprom to supply Europe with more energy, even though he has blamed Europe’s supply shortages on a lack of long-term planning and shortages at the pumps.
More tensions are brewing elsewhere across Europe’s energy grid, as Belarus President Alexander Lukashenko is threatening to cut supplies into Europe.
The EU has approved sanctions against the country for transporting migrants to camps near its Polish border.
Meanwhile, UK Prime Minister Boris Johnson has warned that new gas pipelines with Russia undermine European stability.
Johnson said: “We hope that our friends may recognize that a choice is shortly coming — between mainlining ever more Russian hydrocarbons in giant new pipelines, and sticking up for Ukraine and championing the cause of peace and stability.”
In the immediate aftermath to Germany decision to suspend Nord Stream 2, the Russian government told reporters it “absolutely” did not see a political motive behind the regulator’s decision.
Instead, it was a technical matter that would be resolved with the new subsidiary company.
Kremlin spokesman Dmitry Peskov said: “In this case, there are protocols and certain norms of European legislation, and the company [the operator] is ready to meet every requirement of the current legislation in order to commence operation of the project, which is important to everyone, as soon as possible,” he said.