Fears of Europe gas crunch mount as Russia cuts Nord Stream 1flows

Russiawill slash gas supplies throughits largest pipeline to Germany to a fifth of capacity this week, cuts that threaten to leave the continent short of critical suppliesaheadof thewinter. State-owned energy group Gazprom said it would cut flows on the Nord Stream 1 pipeline in half to just 20 per cent of capacity from tomorrow, having alreadylowered them to 40 per centlast month. European politicians have decried Russia’s “weaponisation” of gas supplies. The Gazprom move came as German business confidence fell to its lowest level formore than twoyears, a new sign that Europe’s largest economy was on the brinkof recession. Companies across Germany have becomegloomierover their current predicament and the outlook for the next six months, according to the Ifo Institute’s closely watched index of business confidence. Second-quarter gross domestic product figures out on Friday are expected to show growth of only 0.1 per cent, according to economists polled byReuters. Germany has been hit hard by inflation and the Russian gas crisis. Gazprom has claimed that the volume cuts are caused by problemswith turbinesmaintained by Germany’s Siemens Energy at a factoryin Canada. It said the company still had “open questions” over British andEU sanctions. However, Canada this month waived sanctions restrictions on providing equipment toGazprominorder to allow the returnof the turbines. Berlin and gas market analysts say Russia is using the issue of turbine repairs as a pretext for cutting flows. A spokeswoman for Germany’s economy ministry said there was “no technical reason” for the supply reduction. European capitals will interpret Gazprom’s move as Russian retaliation for sanctions imposed after its invasion ofUkraine. Europe is already struggling to fill gas storage facilities, leading to warnings of rationing forindustryand fearsof shortages for domestic users. Concern has also risen thatRussiawill completely halt exports of gas, leading the European Commission to tell EU member states to cut their consumption by 15 per cent over the winter. EU capitals have pushed back at the plan, however, and ambassadors in Brussels have struggled to reach a deal due to be signed off today. “There is no plan B,” a senior EU diplomat said on the importanceof the gas-reduction deal. Tom Marzec-Manser at consultancy ICIS saidif thelatestRussian supply cuts were to last, further efforts would be required from European governments “to incentivise demand reductions, especially from theindustrial sector”. European gas prices shot higher after Gazprom signalled the gas to the continent would be cut, rising 10 per cent to trade at €177 per megawatt hour — five times higher than the priceayearago.