Europe’s Russian energy crisis is growing and costs are rising

European benchmark natural gas prices rose 28% on Monday morning to €274 ($272) per megawatt hour – the first day of trading after Russian energy giant Gazprom halted flow-through critical Nord Stream 1 Pipeline indefinitely, claiming that he had found an oil leak in a turbine.
Last year, the pipeline delivered about 35% of total Russian gas imports to Europe. but Since June, Gazprom Just by reducing the flow with Nord Stream 1. Had done it 20% of its capacityCiting a dispute over a missing turbine mired in maintenance issues and Western export restrictions.

Moscow’s decision on Saturday not to reopen the pipeline raised concerns that the EU could run short of gas this winter, despite a successful attempt to fill storage tanks. Similar fears in the United Kingdom propelled wholesale natural gas futures by more than a third on Monday.

The euro sank on Friday after news of the pipeline’s indefinite closure below $0.99 on Monday – its lowest level in 20 years, The pound hit $1.14, its lowest since 1985, as traders worried about the toll that could potentially lead to massive energy shortages. On regional economic activity and government budgets.

Some countries are preparing to spend big to try to limit the pain.

On Sunday, the German government announced a €65 billion ($64 billion) relief package to help households and companies cope with rising inflation. Germany, Europe’s largest economy, is Particularly dependent on Russia’s gas exports To power their homes and heavy industries.

Together with previous measures, that brings the total amount of government aid to €95 billion ($64 billion), equivalent to about 2.5% of German GDP, Berenberg’s chief economist Holger Schmiding said in a Monday note.

Liz Truss, who will replace boris johnson As Britain’s prime minister this week, there is enormous pressure to announce more aid for families and businesses energy bills rocket higher,
The truss is considering a £100 billion ($115 billion) package to help with rising costs of living, including support to pay energy bills, according to a report. The Sunday TimesWhich cited unidentified sources in the country’s finance department.
If so it will be more than the cost of the country pandemic furlough schemeIn which the government subsidized about £30 billion ($34 billion) in workers’ wages to prevent mass layoffs.

winter preparation

For months, the EU has been increasing its grip energy reserves For the colder months, when usage spikes, because he fears Russia will cut gas supplies further.

Already, Moscow has stopped sending gas to several “unfriendly” European countries and energy companies for refusing to pay for gas in rubles, as the Kremlin insists, instead of euros or dollars in contracts.

Friday’s Nord Stream 1 announcement comes just hours later G7 nations agreed to limit the price at which Russia can sell its oil To limit the revenue the Kremlin is using to fund its war in Ukraine.
a spokesperson for Siemens ,GCTAF,The German maker of an allegedly faulty Nord Stream 1 turbine said on Friday that an oil leak “was not a technical reason to stop operations.”

“Despite this, we have already stated several times that there are sufficient additional turbines available at Portovaya Compressor Station for Nord Stream 1 operation,” the spokesperson told CNN Business.

As the energy impasse has intensified, EU countries increasingly fill up their gas storage facilities. According to data from Gas Infrastructure Europe, the stores are now filled to 82 per cent of their capacity – more than the 80 per cent set by the target authorities to reach before November.

In his note, Schmeeding said, “Despite the serious risk of energy shortages, we still expect much of Europe to go through cold weather without shutting down significant parts of the industry by mass rationing of gas supplies. ”

European leaders know they need to do more to avoid widespread hardship and limit the damage from the recession. The European Union energy minister will hold an emergency meeting on Friday to discuss a plan to help shield Europeans from the worst rises in energy prices.
Initial ideas include a mechanism that separates electricity prices from wholesale natural gas prices, and emergency credit offers for energy companies at risk of spoilage, according to draft documents seen by Reuters,