Gazprom announced a new reduction in Russian gas flows to Germany via Nord Stream 1 starting Wednesday, July 27. In a statement, the Russian gas company announced that it would reduce supplies for maintenance work to another turbine by 20%.
The gas flow through the pipeline running from Russia to Germany under the Baltic Sea will drop to 33 million cubic meters on Wednesday. Nord Stream 1 has a daily capacity of approximately 167 million cubic meters. By June, the Russian state-owned energy giant had reduced that volume to just 67 million cubic meters per day.
A dispute over a turbine sent for repair to Canada is still ongoing. Russian President Vladimir Putin recently warned that a second turbine to be repaired could lead to a further reduction in supply.
On July 19, Russian President Vladimir Putin commented in detail on the situation around the work of Nord Stream under the sanctions. He explained that six Siemens turbines are used in normal mode to ensure gas supplies through it, one of which is in reserve, but now only two units are operating. At the same time, as Putin said, around July 26, one of these turbines should also go for routine repairs; that is, only one turbine will remain working.
On July 25, Gazprom announced that it had received documents from the Canadian authorities from Siemens. Still, questions remain, including on the European Union’s and Great Britain’s sanctions. The solution to these issues is important both for the return of the repaired turbine for Nord Stream to Russia and for an urgent overhaul of other turbines.
Germany disputes turbine logic
The German energy regulator, Bundesnetzagentur, has announced that it has not identified “any technical reason” for the reduction in the Russian gas supply through Nordstream 1 and has announced that it is monitoring the situation with the Ministry of Economy and the Gas Crisis Unit closely. The announcement came after Russia cut supplies to 60% in June, then to zero for a ten-day maintenance period in July, during which fears were expressed that Moscow might not reactivate supplies.
Russia, therefore, restored gas flows to 40% of the pipeline capacity upon completion of maintenance. The recent announcement that supply will be cut by half, to 20%, raises concerns that Germany could run out of gas during the winter.
Russia denies energy blackmail charge
Accusations of Russia of being an unreliable gas supplier are “at odds with the reality” and “history” of Russian supplies to Europe, Kremlin spokesman Dmitry Peskov said earlier in the day, rejecting the accusations of the German Chancellor Olaf Scholz.
Pesko told Tass that the statements are in absolute contrast to the reality and history of deliveries. Even in the most challenging times, the Russian side has fulfilled its obligations. And the amount of deliveries has suddenly decreased due to the illegal restrictions imposed by Europeans, notably in Germany. He said the Europeans themselves suffer from these restrictions.
Inflation rises in Germany
The German business climate index (IFO), which reflects an assessment of the economic situation of the country and forecasts for six months, collapsed to a minimum of 2.5 years. Now it is evident to everyone, even the most desperate optimists, that Europe’s first economy is starting to decline against record inflation and the threat of cutting off Russian energy supplies.
The business climate index, published by the Munich-based Institute for Economic Research (IFO), has fallen, according to Bloomberg, by more than five points: from 85.8 in June to 80.3 in July. The index of current economic conditions also declined.
Germany is on the verge of a recession,” IFO President Clemens Fuest said. High energy costs and the possibility of a gas shortage have significantly impacted the economy. He added that companies anticipate a considerable decline in economic activity in the coming months.
Another IFO study clearly shows the pessimistic mood that now prevails in Germany. Rampant inflation and a shortage of spare parts and components, exacerbated by the events in Ukraine, have sharply slowed the recovery from the pandemic. S&P Global’s Private Sector Activity Index suggests that in July, Europe’s top economy began to contract for the first time this year.
The Bundesbank warned last week that price increases would remain strong in the coming months. Moreover, banking economists do not exclude the possibility that the prices will rise sharply in September because the temporary assistance measures will end. All analysts point out the serious impact on the mood of the business fears about the supply of energy from Russia.
The main risk for Germany, which receives a huge part of its natural gas from Russia, is that further reductions in Russian energy supplies, and even keeping them at the current low level, could lead to further inflation.