Russia again cuts natural gas exports thru European pipeline

Move comes as Israel, Egypt and European Union sign memorandum of understanding on gas sales.

By Associated Press.

Russia’s Gazprom announced a reduction in natural gas flows through a key European pipeline for the second day in a row Wednesday, creating further energy turmoil for Europe as it tries to reduce its extensive use of Russian oil and natural gas amid the war in Ukraine.

The move came hours after the European Union, Israel and Egypt signed a memorandum of understanding on natural gas sales.

Gazprom said on Twitter that deliveries through the Nord Stream 1 pipeline to Germany would be cut again Thursday, bringing the overall reduction through the undersea pipeline to 60 percent.

The drop in shipments of gas used to power industry and generate electricity would amount to some 16 billion cubic meters by the end of the year, or around 10% of total European Union gas imports from Russia, according to Simone Tagliapietra, an energy policy expert at the Bruegel think tank in Brussels.

The new cut came a day after Gazprom said it would reduce flows by 40% after Canadian sanctions over the war prevented German partner Siemens Energy from delivering overhauled equipment. It blamed the same issue for the additional reduction.

But German Vice Chancellor Robert Habeck said Wednesday that Gazprom’s initial move appeared to be political rather than a result of technical problems. He said the new developments “clearly show the Russian side’s explanation is simply an excuse.”

“Obviously, the strategy is to unsettle people and push up prices,” Habeck said.

Gazprom also told Italian gas giant Eni that it would reduce gas through a different pipeline by roughly 15% on Wednesday. The reason for the reduction has not been made clear, and the Italian company said it was monitoring the situation.

The reduced flows to two of Europe’s biggest importers of Russian natural gas follow Russia’s previous halt of gas supplies to Bulgaria, Poland, Finland, the Netherlands and Denmark.

Europe is working to reduce its dependence on Russian energy as the war worsens rising oil and gas prices that are fueling record inflation. Gas demand has fallen after the end of the winter heating season, but European utilities are racing to refill storage ahead of next winter with prices high and supplies uncertain.

While gas storage is refilling well, the cutoffs and reductions come on top of an explosion at a liquefied natural gas terminal in Texas whose exports were largely going to Europe, adding another squeeze to the tight natural gas market, energy expert Tagliapietra said. He urged Europe “not to be complacent and urgently scale-up coordination” so the continent is “prepared for a possibly difficult winter ahead.”

Tagliapietra said the Kremlin was pursuing several goals in order to undermine European unity and backing for sanctions against Russia.

One was short-term market manipulation to drive up gas prices, creating more stress on Europe and more revenue for Russia. Another goal, after the cutoffs to smaller countries, “is to remind the big countries that the gas is not to be taken for granted.”

“Russia never acts on a general level. It is always targeting individual countries, one by one, always to play this divide and rule strategy from the very beginning,” Tagliapietra. “This is a strategic game, this is not random.”

Siemens Energy said a gas turbine that powers a compressor station on the Nord Stream 1 pipeline had been in service for more than 10 years and was taken to Montreal for a scheduled overhaul. But because of sanctions imposed by Canada, the company has been unable to return the equipment to Gazprom.

Habeck, who is also Germany’s economy minister and responsible for energy, told reporters in Berlin that he had established with the EU’s executive Commission that the maintenance of Siemens compressor stations on the pipeline isn’t subject to EU sanctions.

He said officials are in contact with Canada to check what is possible under Ottawa’s sanctions. But he added that, as far as German officials know, the first “relevant” maintenance session isn’t due until the fall, and because there are several such installations, that wouldn’t explain a 40% reduction.

“So I also have the impression that what happened yesterday is a political decision, and not a decision that is technically justifiable,” Habeck said. “What effect it has on the European and German gas market, we will have to wait and see. As a rule, suppliers have always succeeded in getting hold of gas from other sources.”

He said there’s no supply problem in Germany, which gets about 35% of its natural gas from Russia, and it should be able to keep filling up reserves. Habeck said the missing gas can be obtained on the market but the price will be higher.

The EU has outlined plans to reduce its dependence on Russian gas by two-thirds by year’s end. Economists say a complete cutoff would deal a severe blow to the economy, consumers and gas-intensive industries. The 27-nation bloc is already reeling from high inflation this year.

“If you have the feeling that all your homework is done and everything is going well, you’re wrong,” Habeck said. “It isn’t over yet. It may only just be beginning … making ourselves independent from fossil energy and Russian fossil energy must be advanced at high pressure.”