Europe announces gas rationing plan 1:05
(CNN Business) --
The European Union unveiled an emergency gas rationing plan in the face of the possibility that Russia will drastically cut off the flow of natural gas to the continent on Thursday.
The "Save Gas for a Safe Winter" plan, announced this Wednesday, establishes the objective that the 27 Member States reduce their demand for gas by 15% between August and March of next year.
That reduction is based on the average gas consumption of the countries during the same months in the previous five years.
The plan focuses on reducing demand from businesses and public buildings, rather than homes.
Among the proposed measures, the European Commission encourages the industry to switch to alternative energy sources, including coal when necessary, and to introduce auction systems that compensate companies for reducing their gas consumption.
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The commission also hopes to pass a new law that would empower it to force states to reduce their gas demand "when there is a significant risk of serious gas shortages or exceptionally high demand," it said in a press release.
Before September, countries will have to update their national gas reduction plans to show how they will meet the new target.
The measures come just a day before authorities fear that Gazprom, the Russian state-owned gas company, will refuse to resume deliveries through the Nord Stream 1 pipeline. The Nord Stream 1 has been closed for the past 10 days for its routine maintenance.
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European Commission President Ursula von der Leyen said on Wednesday that a complete shutdown of Russian gas was a "likely scenario."
"Russia is blackmailing us. Russia is using energy as a weapon," he told a news conference to announce the new plan.
The pipeline is a vital artery linking Russia's vast gas reserves to the continent through Germany.
It supplies 55,000 million cubic meters of gas a year, that is, almost 40% of the total imports of the bloc from Russia.
Last month, Gazprom cut the flow of this pipeline by 60%, blaming the West's decision to withhold vital turbines due to sanctions imposed on Russia for its invasion of Ukraine.
Pipe systems and shut-off devices at the gas receiving station of the Baltic Sea pipeline Nord Stream 1 and the transfer station of the OPAL (Ostsee-Pipeline-Anbindungsleitung) on July 11, 2022, in Mecklenburg, West Pomerania, Lubmin , Germany.
Those turbines have since been allowed to travel to Germany from Canada, where they were undergoing repairs, under a sanctions waiver, the Canadian government reported last week.
But Russia could still decide to keep the taps turned off.
The country has already stopped supplying gas to several European countries and energy companies, because they have rejected Russian demands to pay for gas in rubles, a move that would make them breach European sanctions.
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On Tuesday, Russian President Vladimir Putin said during a visit to Iran that Gazprom would "fully fulfill its obligations" in supplying gas to Europe.
But he warned that deliveries could drop 20% next week if he doesn't get the turbine, according to a report in The Wall Street Journal.
Gazprom confirmed in a tweet on Wednesday that it had not yet received the necessary documentation from Siemens, the turbine's manufacturer, to allow its delivery to Russia.
Siemens told CNN it would not comment on Gazprom's claims.
The ongoing uncertainty over gas supplies in Europe has pushed benchmark gas prices up about 85% since the invasion of Ukraine began in late February, according to the Intercontinental Exchange.
On Wednesday, prices rose 5% to 161 euros ($165) per megawatt hour, as the pipeline's reopening deadline approached.
Germany in danger
Germany would be especially vulnerable to reduced gas supplies.
The region's largest economy has long relied on Russian gas to power its homes and heavy industry.
In June, the country activated the second of its three phases of the emergency gas rationing program, days after Russia reduced flows through the Nord Stream 1 gas pipeline. Although it has managed to reduce Russia's share of its imports from 55 % to 35% since the start of the war, a drastic cut could severely limit its ability to fill its gas reserves for the winter, as well as plunge the country into a recession.
On Monday, struggling German gas distributor Uniper tapped into a 2 billion euro ($2.05 billion) credit line with KfW bank due to the impact of Russian gas supply disruptions.
Robert Habeck, Germany's economics minister, said earlier this month that the country must "prepare for the worst" ahead of Thursday, when the pipeline is expected to come back online.
Gas storage levels in the European Union are currently approaching 65%, according to the organization Gas Infrastructure Europe.
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That's much higher than the same time last year, but still a long way from the 80% target the bloc has set for November, Henning Gloystein, director of energy, climate and resources at Eurasia Group, told CNN Business.
"If [Nord Stream 1] continues to shut down or only partially returns after maintenance, it will be difficult for Germany and the entire EU to reach that goal, hence the possibility of further political measures to reduce gas use," Gloystein said.
A "dangerous" situation
The bloc is racing to secure alternative gas supplies to avoid potentially catastrophic shortages this winter.
But the crisis could come sooner than expected, depending on Russia's next moves.
The International Monetary Fund said on Tuesday that a complete cut off of Russian gas could reduce the GDP of Hungary, Slovakia and the Czech Republic, countries especially dependent on exports from Moscow, by as much as 6%.
"The point where the crisis will deepen is getting closer as we head into the summer and fall, and it's more and more a question of 'when' rather than 'if' the crisis hits," Vladimir Petrov, principal energy analyst at Rystad Energy, said in a note Monday.
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Fatih Birol, executive director of the International Energy Agency (IEA), described Europe's situation as "dangerous" and said it must prepare for a "long and harsh winter".
According to the IEA, even if European countries manage to fill their gas reserves to 90% of capacity, they are likely to face supply disruptions early next year if Russia decides to cut gas deliveries from October.
The agency said earlier this week that Europe must find a way to save 12 billion cubic meters of gas, the equivalent of 3% of its annual consumption, in the next 12 weeks to avoid disaster.
The agency outlined a series of measures that countries could adopt, including burning more coal and oil.
"It's a big request, but it doesn't exaggerate the magnitude of what is needed," Birol said in a news release Monday.
"It is not enough to rely on gas from non-Russian sources, as these supplies are not available in the volumes needed to replace missing supplies from Russia," he added.
Mark Thompson and Nadine Schmidt contributed to this report.
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