Germany warns that Putin’s gas cuts will generate a crisis similar to that of 2008

German Economy Minister Robert Habeck warned that energy providers are accumulating losses due to the supply crisis

By iProfessional

06/23/2022 – 10:44 a.m.

Germany warned that Russia’s moves to cut natural gas supplies to Europe could cause a collapse in energy markets, and drew a parallel with Lehman Brothers’ role in triggering the financial crisis.

Energy providers accumulate losses by being forced to cover volumes at high prices, so there is a danger of a contagion effect for local utilities and their customers, including consumers and businesses, said the Thursday the Minister of Economy, Robert Habeckafter raising the risk level of gas in the country to the second highest “alarm” phase.

“If this minus gets so big that they can’t carry it anymore, the whole market risks collapsing at some point,” Habeck told a short-notice news conference in Berlin. “So you can give an effect Lehmann in the energy system,” he said.

Putin suffocates Germany with gas

The largest economy Europe faces the unprecedented prospect of businesses and consumers running out of power. For months, Russian President Vladimir Putin has ordered a gradual reduction in supply in apparent retaliation for sanctions imposed over the invasion of Ukraine.

The standoff intensified last week following heavy cuts to the main gas link with Germany, jeopardizing reservations for the winter.

The increased alert reinforces market vigilance, and some coal-fired power plants will be reactivated. Habeck said that it is also a signal for Europe to reduce energy consumptionand that talks are planned with Germany’s partners in the bloc in the coming days.

The alert phase it also gives the government the option to enact legislation that allows energy companies to pass on cost increases to households and businesses. Habeck said that, for now, he reserved price adjustments to see how the market reacts.

“It will be a rocky road that we have to go through as a country,” he said. “Although we still don’t feel it, we are in a gas crisis,” he warned.

Early warning in Germany for gas shortage

The futures of dutch gas One month ahead, the European benchmark, they rose as much as 7.7% to a one-week high of $144 per megawatt-hour in Amsterdam.

The contracts have gained more than 50% since the state gas giant, Gazprom PJSCcut flows from the key Nord Stream gas pipeline by about 60%.

Germany, which relies on Russia for more than a third of its gas supplies, enacted the initial phase of “early warning” in late March, when demands for payment in rubles from the Kremlin led Germany to prepare for a possible supply cut. The third and highest level of “emergency” would involve state control of distribution.

The crisis has spread beyond Germany, with 12 European Union member states affected and 10 issuing an early warning under gas safety regulations, it said. Frans Timmermannsresponsible for the climate of the European Union, in a speech before the European Parliament.

“The risk of a total gas outage it is now more real than ever,” he said. “This is all part of Russia’s strategy to undermine our unity,” he said.

Habeck, who is also deputy foreign minister, said Russia’s move to cut gas deliveries through the pipeline North Stream makes it almost impossible to secure sufficient gas reserves for the winter without additional measures.

He indicated that he is concerned that the Nord Stream link will not return to its normal capacity after a 10-day maintenance period beginning July 11.

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