What happens if Russian gas supplies to Germany cease?

Reuters

Germany, the fourth largest economy in the world, is preparing for all scenarios, including the complete disruption of Russian natural gas supplies after the regular 10-day maintenance period on the North Stream pipeline is completed.

Works on the maintenance of the pipeline, which brings Russian gas directly to Germany, began on 11 July, but Berlin is considering whether gas is being used by the Kremlin to exert political pressure on the West, which is denied by Moscow.

Here you can learn some of the dangers of if the period of gas cuts lasts longer or if the gas pipeline is reopened with reduced supplies:

Why is North Stream 1 so important?

This pipeline makes the largest route to Russian gas to Germany, bringing 55 billion cubic metres of gas annually. Germany has consumed 100 billion cubic metres of gas last year.

Russian gas shipments coming through Poland have been cut off this year, and those transported through Ukraine have been restricted by war.

Half of German households depend on heating gas, separately from October to March, and a failure to reopen the Northern Stream pipeline 1 would derail plans to reload underground gas depots to be prepared for the winter season.

The subterranean dens could, in theory, meet the requirement for two and a half months, but they are only 64.6 percent of their capacity, compared with the goal that by October these warehouses will be filled up to 80 percent of their capacity.

Meanwhile, worldwide there is a narrow market for gas alternatives, and prices have increased since last year following demand increases.

How and when would Germany limit gas for its consumers?

If Germany decided to activate phase three of the emergency plan, the network regulator, Bundesnetzagentur, would be mandated to ensure that gas distribution is done fairly.

This phase would be triggered if there were tremendous increases in the demand for gas or large disruptions in supply, such as if North Stream 1 was still closed.

Germany is in phase two of this emergency plan since June 23rd, as gas supplies across Northern Stream 1 fell to 40 percent of capacity.

Which sectors are most endangered?

The producers of chemical, steel, glass and paper products are the leading industrial gas consumers in Germany, but if Russian gas supplies were stopped, the effects would be increased and the industries of porcelain and food production would also be affected.

The aluminum industry, with sales of 22 billion euros and 60,000 workers, is also dependent on gas to smelt aluminum and recycling.

In the paper industry, which has a circulation of 15.5 billion euros and employs 40,000 people, operators say paper and cardboard are vital for food products, medicines and hygiene products.

What are companies doing?

Germany's largest gas importer, Unipper, has requested a rescue package from the Government, which according to a Reuters source is worth $9 billion. But there are other companies that may face similar problems.

The main steel producer, Thyssencrupp, has started drafting plans in the event of a gas supply disruption, said a company spokesman, as the use of oil or coal in the country's gas is not possible for this company. If the situation deteriorates, then the Thyssencrip plants will be forced to close and there may be technical problems of the aggressors.

Cutting off gas supplies for aluminum plants for only 30 percent would mean that half of them would be out of work, the industry's association said. The main companies in this industry are Hydro Aluminium, Speira and Trimet.

The chemical giant, BASF, has to have about 50 percent of its maximum gas demand, and the failure of Russian gas could cause this company to implement an emergency plan.

What can happen to the economy?

In the darkest forecast so far, a bavarian industry group has said the state could lose up to 12.7 percent of its performance in the second half of 2022 if there will be complete disruptions of Russian gas supply.

What are the sociopolitical risks?

Social gas disputes can spur extreme right and left policy populists. This could damage the rational disk about how to operate in case of gas failure.

Berlin has adopted a law that opens up opportunities to move directly to high prices or to distribute price hikes among consumers. / REL