In a move that coincided with the visit to Kiev of Three Stooges Macron, Scholz, and Draghi, Moscow started to cut gas supplies to Europe. First, Gazprom cut gas supplies flowing through the Nord Stream 1 pipeline to Germany to 100 million cubic meters per day, and then reduced it to 67 million cubic meters. Gazprom said the action was due to Canada not sending needed spare parts because of the anti-Russian sanctions.
Almost simultaneously, Gazprom cut gas deliveries to Italy by 15%, without explanation.
The cuts pushed gas future contract prices to over 140 Euros per MwH today at the Dutch exchange.
The Russian move is a clear warning. Russia’s Ambassador to the European Union, Vladimir Chizhov, said on Thursday that persistent problems with repairs to compressor stations could lead to Russia shutting down the Nord Stream 1 pipeline altogether. He suggested that in that case, Nord Stream 2 could be used.
German and Italian leaders are shocked by the action. Draghi told journalists that although there is no emergency currently, the reduced supplies “make the build-up of reserves more difficult.” Remember, that filling reserves was an indispensable condition for the EU to implement the threatened gas embargo against Russia next winter.
But if Russia further reduces supplies, Germany and Italy will suffer a severe blow and be forced to ration gas for industry and households. Russia’s gas exports to Europe account for only 2% of Russian GDP, however, and Moscow could absorb this with minor damages.
There is no way these countries can substitute those imports in the short term. Even the bit of LNG promised by Biden won’t come in time. After the explosion that destroyed the Freeport, Texas, LNG hub from which tankers to Europe leave, the company has communicated that the hub won’t be operative until late this year.
Economist Michele Geraci’s team has calculated that a total Russian gas embargo to Italy would cost a 7% drop in GDP, in addition to the already negative forecast.
