The crisis in the EU-Russia gas relationship has taken another turn for the worse, with Germany, Italy and France all reporting cuts in supply after all three countries backed Ukraine’s bid for EU candidate status.

The leaders of Germany, France and Italy, as well as Romania, threw their support behind providing immediate EU candidate status for Ukraine and Moldova in a joint news conference in Kyiv on June 16, laying to rest any doubts over their stance. In the run-up to that announcement, Russia curtailed gas supply to Germany, France and Italy, forcing the three countries to put their energy systems on high alert.

The curtailment in Russian supply has also driven up already sky-high gas prices in Europe. The July contract at the Dutch TTF hub has risen more than 50% over the past week. On June 20 it gained nearly 5% in early trading, coming to €124 ($131)/MWh. Exacerbating the market’s tightness, the 15mn tonne per year (tpy) Freeport LNG terminal in Texas suffered an explosion on June 8, taking out of action what has been the source of 10% of Europe’s LNG imports in recent weeks.

Germany

On June 14, Gazprom said it was reducing gas supply via Nord Stream 1 to 100mn cubic metres per day, down from a previous plan of 167 mcm per day, because of technical difficulties at the Portovaya compressor station that handles the pipeline’s gas. The company followed this up with an announcement on June 15 that it was curtailing output at Portovaya further to 67 mcm per day, representing a 60% reduction versus the original plan.

Specifically, Gazprom pointed to Siemens’ failure to return on time turbines to Portovaya that had been sent off to repair. The German engineering group confirmed to Reuters that it had been unable to do this because of Canadian sanctions. Turbines represent a particular vulnerability for Russia’s energy system, as it is heavily reliant on foreign equipment and services here. However, Germany’s government has dismissed the disruption at Nord Stream 1 as politically motivated.

“Russia’s reason [for reducing gas supplies] is just a pretext,” German Vice-Chancellor Robert Habeck said. “Their strategy is obviously to unsettle [people] and drive up prices.” Germany’s reliance on Russian gas has fallen in recent months, partly through its own efforts to diversify supply but more significantly because Gazprom has cut off some buyers, including Poland in April and Finland in May. But Germany still sources approximately 35% of its gas from Russia, and natural gas has come to play an increasingly large role in its energy mix, to support intermittent renewables as it has steadily phased out nuclear and coal-fired capacity in recent years.

The German government announced on June 19 additional measures to boost gas storage levels ahead of the next winter heating season, amid rising fears that Moscow could cut off gas supply to the country completely. Its economy ministry said the new measures would include increased reliance on coal-fired power plants, as well as the introduction of an auction system starting in the coming weeks that would provide incentives to industry to consume less. The government is also providing a €15bn ($16bn) credit line to Germany’s gas market operator via state lender KfW, to help it stock up on gas faster, according to Reuters.

Germany’s gas storage facilities are currently under 58% full, meaning that the country still has considerably further to go to reach the EU-mandated target of having storage utilisation at 80% by November 1, in preparation for winter. The country has had to fill up its facilities faster than many of its neighbours in recent months, as several of them until recently owned by Gazprom were left depleted at the start of last winter.

Italy and France

Italy is likewise significantly reliant on Russia for its energy needs. The country covers around 17% of its gas demand with Gazprom supply, and gas plays an even greater role in its energy mix than that of Germany. Whereas gas accounts for only 27% of the German energy mix, it amounts to 41% of the Italian one.

Italy’s Eni reported on June 15 that Gazprom had cut gas flow by 15%, without providing an explanation. The company then said on June 17 that the reduction had increased to 50%. Like their German counterparts, Italian officials have rejected Gazprom’s “technical reasons” as an excuse.

“Both Germany and us, and others, believe these are lies,” Italian Prime Minister Mario Draghi said at the press conference in Kyiv. “In reality they are making a political use of gas like they are using grain for political use.” Italy may declare a heightened “state of alert” next week if Russia continues to scale back supply, Reuters reported on June 16. Such a declaration would trigger a range of measures to curb gas consumption, including rationing supplies to selected industrial users under existing contracts, increasing generation at coal-fired plants, and tapping additional gas from other suppliers where possible. A meeting of Italy’s emergency technical committee for gas will take place on either June 21 or 21 to review the situation, according to Reuters.

Italy’s gas storage facilities are currently at under 55% capacity.

Meanwhile, French gas transmission system operator GRTgaz reported on June 17 that gas flow from Germany to France had ceased two days earlier, citing a reduction in Russian volumes. GRTgaz said it did not expect any problems meeting French summer demand for gas, but stressed the need for all shippers and stakeholders to prioritise the refilling of storage sites, which are currently at 56% capacity.

France is less exposed to a Russian supply cut-off from Germany and Italy, given that it takes only 17% of its gas from Gazprom, and gas only accounts for 16% of the French energy mix. However, continuing technical problems at the country’s fleet of nuclear power plants (NPPs) represent a risk. And a cut-off in Russian supply to any European country hurts most others, by further driving up prices and diverting volumes. Russia has already cut off gas to Bulgaria, Denmark, Finland, Poland and the Netherlands, for their failure to comply with its rubles-for-gas decree.

Who’s next

Tensions are likely to remain high as more disruptions are slated for the coming weeks. Gazprom announced on June 18 that it was shutting down TurkStream, which supplies gas to southern Europe, between June 21 and 28 for more maintenance.

“Gas transmission via both strings of the TurkStream gas pipeline will be suspended from June 21 to 28, 2022, in connection with planed preventative maintenance,” Gazprom said in a statement. “The suspension of gas transmission was agreed in advance by all stakeholders.”

TurkStream carries 31.5bn cubic metres of gas a year to the southern European states, landing in Turkey and sent on through an expanding pipeline network.

Likewise, Gazprom will shut Nord Stream 1 one down for a week at the end of July for its annual scheduled maintenance that will also restrict flows to Europe. While this happens every year, in the current climate the shutdown will only fuel further tensions.