(Reuters) – Berlin and Copenhagen An industrial group on Tuesday warned that if dwindling Russian gas supplies totally stop, Germany will experience a recession, while Italy said it would consider providing financial support to help companies fill gas storage to prevent a worsening crisis this winter.After Russia's invasion of Ukraine placed energy at the center of an economic conflict between Moscow and the West, governments in the European Union from the Baltic Sea in the north to the Adriatic in the south have outlined preparations to deal with a supply problem.
Before the conflict, the EU relied on Russia for up to 40% of its gas needs; this percentage rose to 55% for Germany, leaving a major gap in the already constrained global gas market. In response, some nations have temporarily reversed their intentions to shut down coal power stations.
The rise in inflation brought on by record-high gas prices has made it more difficult for policymakers to save Europe's economy from certain doom.
The BDI industrial association in Germany on Tuesday reduced its economic growth prediction for 2022 from the 3.5 percent anticipated before the conflict started on February 24 to 1.5 percent. It said that stopping Russian gas shipments will inevitably lead to a recession in the biggest economy in Europe.
Although at a slower pace, Russian gas is still pumped through Ukraine. Only 40% of the Nord Stream 1 pipeline's capacity is being used, despite it being a crucial supply route to Germany. Moscow claims that Western sanctions are impeding repairs, while Europe claims that this is only a cover for reducing flow rates.
Reduced supplies, according to German Economy Minister Robert Habeck, are part of Russian President Vladimir Putin's strategy to sow panic and constitute an economic attack.
Habeck declared, "This is a new dimension. "We cannot permit the success of this tactic."
The slowdown has made it more difficult for Europe to fill storage tanks, which are currently only about 55 percent full, in order to reach an EU-wide goal of 80 percent by October and 90 percent by November, a level that would enable the bloc survive winter if supplies were further disrupted.
After energy giant Eni reported a shortage in flows from Russia for more than a week, the Italian government announced early measures on Tuesday to increase gas storage.In a statement, Minister of Ecological Transition Roberto Cingolani said the government intended to buy coal if it had to use coal-fired power stations to conserve gas. Additionally, Cingolani requested that Snam, the company in charge of the gas system, take action to help the gas inventories reach their intended level for June.
The average gas price in Europe was around 126 euros ($133) per megawatt hour (MWh), which is higher than a year ago but lower than this year's top of 335 euros.
THERE IS A PROBLEM,
A three-stage plan to address a gas supply issue has been implemented in nations other than Italy, including Austria, Denmark, Germany, and the Netherlands.
Germany's Bundesnetzagentur gas regulator unveiled details of a new auction system to start in coming weeks, aimed at pushing manufacturers to consume less gas.
The chief of the Bundesnetzagentur questioned if the nation would survive the winter with the existing gas delivery. He had before stated that the third step of the crisis plan, or a full-fledged emergency, was premature.
Klaus Mueller, president of the Bundesnetzagentur, stated on the sidelines of an industry gathering, "As it is now, we have a problem.
Europe had little time to plan, according to Markus Krebber, CEO of RWE, the largest electricity provider in Germany.
"If we were completely cut off, how would we redistribute the gas? As each nation examines its emergency strategy, there is currently no plan in place at the European level "He repeated the incident.
More liquefied natural gas (LNG) cargoes have been lured to Europe by rising prices, but Europe lacks the infrastructure to supply all of its LNG needs, and the market was already oversaturated before the Ukraine conflict.
The difficulty was exacerbated by disruptions at a significant US LNG producer.
However, the majority of producers are already operating at their maximum capacity, therefore Europe is looking for additional pipeline supplies from both its own producers, like Norway, and foreign nations, like Azerbaijan.
Even the smallest user in Europe, Sweden, has teamed up with partners in Europe to start the first phase of their energy crisis strategy.
Although the state energy agency reported that supplies were still plenty, it warned "industry participants and gas customers connected to the western Swedish gas network" that the gas market was under pressure and that a potential worsening of the gas supply situation would occur.
Sweden, whose 3 percent of energy was consumed by gas in 2020, is dependent on piped gas imports from Denmark, where storage tanks are currently 75% filled. On Monday, Denmark began implementing the first phase of its emergency plan.
($1 = 0.9477 euros)
(Writing by Edmund Blair and Barbara Lewis; Editing by Carmel Crimmins, Mark Potter, and David Gregorio; Reporting by Rachel More and Paul Carrel in Berlin, Stine Jacobsen in Copenhagen, Nina Chestney in London, Giuseppe Fonte and Francesca Landini in Rome, and Christoph Steitz and Vera Eckert in Frankfurt.)
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