Federal Minister of Economics Robert Habeck will hold a press conference on Wednesday, March 30, 2022.
Kay Nietfeld | Picture Alliance | Getty Images
Germany has issued an “early warning” that it could soon face a natural gas emergency as Europe’s largest economy braces for the risk of a total supply disruption from Russia.
The Kremlin has repeatedly demanded that so-called “unfriendly” countries pay for gas in rubles, referring to those behind heavy economic sanctions aimed at isolating Russia over its unprovoked attack on Ukraine.
The G-7, which Germany is initiating, has rejected this demand. Most countries currently pay for Russian gas in euros or dollars.
Federal Economics Minister Robert Habeck said on Wednesday that the “early warning” measure was the first of three stages and did not yet imply state intervention in the rationing of the gas supply.
However, Habeck urged consumers and businesses to reduce consumption, telling a press conference that “every kilowatt-hour counts”, according to Reuters.
Germany’s supplies are secure for now, Habeck said, before adding the government is closely following supply flows with market participants.
“Nevertheless, we must increase precautionary measures to be prepared for an escalation from Russia,” Habeck said, according to a translation. “With the declaration of the early warning level, a crisis team was convened.”
European countries’ dependence on Russian energy exports has come under the spotlight since the Kremlin began invading Ukraine on February 24, prompting a spate of economic punitive measures from the US and international allies.
The conflict has triggered a devastating humanitarian crisis and sent shockwaves through financial markets.
Front-month gas prices on the Dutch TTF hub, a European benchmark for natural gas trading, rose more than 14% to 124.2 euros ($138.5) per megawatt-hour on Wednesday morning, according to the New York Intercontinental Exchange.
The TTF Month-Ahead Index has been trading at elevated levels for the past few weeks, in part due to ongoing geopolitical concerns.
“Equipped for all scenarios”
Habeck said Germany, which imported around 55% of its gas supplies from Russia last year, will not be able to achieve full independence from Moscow until mid-2024.
The European Union now gets about 40% of its gas through Russian pipelines, several of which pass through Ukraine.
Klaus Müller, the head of Germany’s network regulator Bundesnetzagentur, said via Twitter that the early warning would help Germany and the European Union avoid a deterioration in gas supplies. Mueller urged consumers and industry leaders to prepare for “all scenarios.”
The German emergency gas plan has three stages. The first has now been triggered, with the early warning measure aimed at preparing for the risk of a potential supply disruption.
The second tier relates to alert, which significantly upsets the usual balance, but the government believes it can still be corrected with market-based measures.
The third level is the emergency where intervention is required. The Federal Network Agency must then decide how the remaining gas supplies will be distributed nationwide.