Russia says cut gas flows to Europe with sanctions preventing Siemens from delivering equipment

Deliveries of Russian natural gas through a key pipeline to Europe will fall by around 40% this year, state-controlled energy giant Gazprom said on Tuesday, after Canadian sanctions against the war in Ukraine were lifted. prevented the German partner Siemens Energy from delivering overhauled equipment.

Germany’s utility network agency said it did not consider gas supply to be at risk and that the reduction in flows via the Nord Stream 1 gas pipeline under the Baltic Sea was in line with commercial behavior and the announced cut. previously by Russia gas to Denmark and the Netherlands, reported the German news agency dpa. . The Federal Network Agency said it was monitoring the situation.

Spot gas prices have risen in Europe, a sign of concerns about the possible additional effects of the war on the supply of Russian gas, which fuels industry and generates electricity on the continent.

The European Union has presented plans to reduce dependence on Russian gas by two thirds by the end of the year. Economists say a complete shutdown would deal a severe blow to the economy, consumers and gas-intensive industries.

High energy prices are already contributing to record inflation of 8.1% in the 19 countries that use the euro.

Gas demand plummeted after the end of the winter heating season, but European utilities are racing to fill storage before next winter with high prices and uncertain supplies.

“The gas supply from the Nord Stream pipeline can currently be supplied up to 100 million cubic meters per day (compared to) the planned volume of 167 million cubic meters per day”, Gazprom RU:GAZP
said in a statement. He did not provide a timetable for the expected drop in gas flows.

Siemens Energy ENR,
-2.32%
said a gas turbine that powers a compressor station on the pipeline had been in service for more than 10 years and had been transported to Montreal for a scheduled overhaul. But because of sanctions imposed by Canada, the company was unable to return the equipment to the customer, Gazprom.

“In this context, we have informed the Canadian and German governments and are working on a lasting solution,” Siemens Energy said in a statement.

Also on Tuesday, the German government announced it was granting an emergency loan to a former Gazprom subsidiary to prevent it from going bankrupt and protect the country’s gas supply.

Germany handed a government agency responsibility for Gazprom Germania in April, saying the move was temporary to bring “order to the terms” of the company after the Kremlin-controlled parent company broke links with its subsidiary.

Gazprom Germania, which plays a central role in trading, transporting and storing natural gas in Germany and neighboring countries, was later hit with sanctions by Russia in a tit-for-tat action for Western sanctions against Ukraine.

German news agency Deutsche Presse-Agentur quoted unnamed government officials as saying the loan would be between 9 and 10 billion euros ($9.4-10.4 billion).

The government said the loan would “avoid bankruptcy and prevent a cascading effect on the market”.

“The money will be used to bolster liquidity and procure replacement gas,” he said in a statement.

The government added that Gazprom Germany would also be renamed Securing Energy for Europe GmbH, or SEFE, as a “clear signal to the market that the objective of the measures taken is to secure energy supplies in Germany and Europe”.

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