Russia so far do not Indicate that the Gas Supply Via Nord Stream 1 will Normalize Again

The expenses from Russia so far do not indicate that the gas supply via Nord Stream 1 will normalize again from Thursday. What’s the closest thing to expect?

Even before July 11, when maintenance work on Nord Stream 1 began, experts expressed legitimate concern that Moscow could use the ten-day work on the main gas pipeline to Germany to continue to restrict gas supplies – or even stop them altogether. In fact, it had the Russian state-owned company Gazprom had previously reduced deliveries via Nord Stream 1 by 60 percent. So tomorrow, Thursday, there will be an oath. What could happen – and what would be the most likely consequences?

Scenario 1: Russia is delivering normally again  The scenario that is normally to be expected is also the most improbable: Russia would increase the delivery volume to the contractually agreed normal level after the maintenance has been completed. That would allow Germany to conveniently fill up its gas storage facilities before winter and even make provisions for later cold periods. However, this “Goldilocks scenario” can be ruled out. Russia could then make good use of the plentiful funds flowing in from the West; However, the Kremlin is aware that the West Europeans’ ability to act increases with every percent more in their gas storage facilities – to the point of being able one day to impose an embargo on gas, as is the case with coal and oil. Moscow emphasizes with regard to the maintenance work, Russia wants to continue to fulfill its obligations in the future. However, Gazprom’s recent maneuvers cast doubt on this message. The state-owned company justified its delivery volumes, which have been throttled since mid-June, with “force majeure”, which the largest German gas importer Uniper immediately rejected. According to the Federal Ministry of Economics, the repeated reference to the gas turbine from Siemens Energy, which has not yet been returned, is also an excuse: “It is a replacement turbine. Nevertheless, we are doing everything we can to take this pretext,” said a spokeswoman for the ministry on Monday Bundesnetzagentur President Klaus Muller said Russia could increase delivery volumes through Ukraine at any time in order to meet its contractual obligations. “But Vladimir Putin obviously lacks the political will.”

Scenario 2: Deliveries are further delayed It is therefore more likely that the Kremlin will continue to act and a delay of a certain or indefinite duration. The gas turbine mentioned would be the most obvious reason in the short term. According to the Russian newspaper Kommersant, it could take until next Sunday for the turbine, which was held back by Canada for a long time after its maintenance due to sanctions, to arrive in Russia – provided there are no problems with logistics or customs.

Scenario 3: Deliveries are stopped completely The most difficult scenario would be a complete stop of deliveries via Nord Stream 1 – be it with new reasons or no explanation from Gazprom. It is also conceivable that Moscow, in violation of the contract, would impose new conditions on further gas deliveries that the customers cannot or do not want to meet. If only because of the then expected price shock for natural gas, most experts assume a recession in Germany in this case. If one follows the calculations of the Federal Network Agency, a “gas shortage” could hardly be averted in this case. The consequence would ultimately be the restriction of gas quantities for industry. A current joint diagnosis by four leading German economic research institutes, on the other hand, comes to the conclusion that even if deliveries from Russia are stopped this year, there is no longer a risk of gas bottlenecks. However, these calculations are subject to large uncertainties. The experts, who calculated at least 1,000 scenarios, had to take a number of variables into account – including the development of domestic consumption, the forwarding of gas to European partners and the pace of construction of the liquid gas terminals. However, there are two reasons in particular against a complete stop in deliveries. First, the Russian state urgently needs the money from gas exports in order to remain able to act in the current economic crisis and to continue financing the war in Ukraine Send Turkey. It is already obvious that the energy superpower is using oil and gas as political weapons. Any further arbitrary act would further undermine Russia’s credibility as a reliable partner.S

Scenario 4: Russia is supplying significantly reduced quantities It is therefore likely that the Kremlin’s dual strategy will continue: On the one hand, gas supplies will be resumed to a certain extent in order to relieve the state budget. At the same time, however, the attempt to exert maximum political pressure with the energy weapon gas. For Germany, this would mean that it would have to worry about an energy crisis for the foreseeable future and that prices would continue to rise. Even efforts to obtain gas from other sources such as liquefied natural gas (LNG) and via new partnerships such as with Azerbaijan and Egypt will not be able to completely end Germany’s dependence on Russian gas in the coming years. The Economy Ministry aims to reduce the share of Russian gas deliveries to around 30 percent by the end of the year. By the summer of 2024, the federal government believes that this proportion can drop to ten percent of consumption. In 2021, the share of Russian gas deliveries was still 55 percent. The race against time for the fill levels of the gas storage facilities would thus remain open, albeit with a realistic chance. According to the Energy Storage Act passed in March, the storage facilities should be 80 percent by October 1st and be 90 percent full by November 1st to ensure an uninterrupted gas supply in the coming winter. According to the Federal Network Agency, the filling level of all storage systems is currently 65.1 percent. It is thus above the level of the past year, but still a good four percentage points below the average of the past five years. However, if the current rate of filling could be maintained, the desired target values ​​would be achievable. For consumers, the prospect remains that they will probably not have to freeze this winter. But you will certainly have to dig deeper into your pockets. “Companies and private consumers have to be prepared for significantly increasing gas prices,” writes the Federal Network Agency in its current management report.

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Russia , Gas Supply ,Nord Stream 1 - /10

Summary

The expenses from Russia so far do not indicate that the gas supply via Nord Stream 1 will normalize again from Thursday. What's the closest thing to expect?

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