EXPLAINER: Europe struggles to cope with Russia gas shutoffs

Sep 6, 2022, 6:36 AM | Updated: Sep 9, 2022, 2:01 pm
FILE - Smoke rises from the nuclear power plant of Nerckarwestheim in Neckarwestheim, Germany, on A...

FILE - Smoke rises from the nuclear power plant of Nerckarwestheim in Neckarwestheim, Germany, on Aug. 22, 2022. Europe is staring an energy crisis in the face. The cause: Russia throttling back supplies of natural gas. European officials say it's a pressure game over their support for Ukraine after Russia's invasion. (AP Photo/Michael Probst, File)

(AP Photo/Michael Probst, File)

FRANKFURT, Germany (AP) — Europe is facing an energy crisis that is squeezing ordinary people’s finances and in just a few weeks could mushroom into rolling blackouts and factory shutdowns. Already, many economists say a recession is on the way.

The cause: Russia has choked off the supplies of cheap natural gas that the continent depended on for years to run factories, generate electricity and heat homes. That has pushed European governments into a desperate scramble for new supplies and for ways to blunt the impact as economic growth slows and household utility bills rise.

On leaders’ plate right now: how to cushion the blow to the poor, who are hit the hardest by higher electricity, gas and food bills, and how to calm electricity and gas markets that have gone haywire, with fluctuating price increases of more than tenfold.

Here is the latest on Europe’s efforts to avoid a total energy disaster:

DID RUSSIA CUT OFF GAS TO EUROPE?

Just about. The crisis deepened when Russia’s state-owned exporter Gazprom said the main pipeline to Germany would stay closed, blaming an oil leak and claiming the problems could not be fixed because of sanctions barring many dealings with Russia.

European officials say it’s energy blackmail, aimed at pressuring and dividing the European Union in retaliation for supporting Ukraine against Russia’s invasion. The halt in the Nord Stream 1 pipeline means Russian gas shipments have fallen 89% from a year ago.

There’s still some Russian gas flowing to Europe through a pipeline passing through Ukraine into Slovakia, and another crossing the Black Sea to Turkey and then to EU member Bulgaria. Russia started cutting back gas as early as last summer, before the war in Ukraine started. That sent gas prices sharply higher. Then Gazprom cut off a number of European countries, further surging costs.

Given Russia’s slow constriction of supplies since last summer, officials are saying Europe needs to be ready fo r zero Russian gas this winter.

WHY IS RUSSIAN GAS SO IMPORTANT?

For decades, Europe depended on Russia for cheap gas. Without it, high energy prices are threatening to cause a recession this winter through record inflation that leaves consumers with less to spend as costs rise for food, fuel and utilities.

A complete cutoff could deal an even heavier blow to an already troubled economy.

Besides heating homes and generating electricity, gas is used to fire a range of industrial processes that most people never think much about — forging steel to go into cars, making glass bottles and pasteurizing milk and cheese.

Companies warn that they often can’t switch overnight to other energy sources such as fuel oil or electricity to produce heat. And as everyone searches for alternate supplies, fuel oil and coal also have risen in price.

In some cases, equipment that holds molten metal or glass is ruined if the heat is turned off, and over the longer term, energy-intensive businesses may simply give up on Europe.

IS THE PROBLEM JUST ABOUT HIGH NATURAL GAS PRICES?

No. Electricity prices also have skyrocketed because gas is a key fuel to generate power. To make matters worse, other sources of power have lagged for reasons not connected to Russia.

Drought has undermined hydroelectric power from rivers and reservoirs. France’s fleet of 56 nuclear power plants is running at half-strength because of shutdowns over corrosion problems in key pipes and repairs, updating and safety checks. A heat wave limited use of river water for cooling power plants, and lower water levels on Germany’s Rhine River reduced supplies of coal to generators.

In a role reversal, France is talking about sending natural gas to Germany, while Germany is exporting electricity to France. Usually it’s the other way around.

Analysts at Rystad Energy say Europe could face a serious electricity shortage as soon as this month. This winter, a worst case of cold weather, low wind generation and a 15% cut in gas use “would prove very challenging for the European power system, and could lead to power rationing and blackouts.”

WHAT IS EUROPE DOING TO EASE THE CRISIS?

Europe has lined up all the alternative gas supplies it could: more liquefied natural gas, or LNG, that comes by ship from the United States and increased pipeline gas from Norway and Azerbaijan. Germany is keeping coal plants in operation that it was going to shutter to reduce greenhouse gas emissions.

The 27-nation EU has approved a plan to reduce gas use by 15% by next March, roughly the amount experts say will need to make up for the loss of Russian gas.

National governments have bailed out utilities forced to pay exorbitant prices for Russian gas and doled out cash for hard-hit households. Public buildings are adjusting thermostats and turning off lights to save energy.

Now, EU officials say it’s time to intervene in energy markets that Russian President Vladimir Putin has broken. The EU has proposed putting a price cap on Russian gas imports to limit painful energy inflation and reduce the amount of money flowing from Europe into Russia’s war chest. Another measure would put a ceiling on energy companies’ windfall profits and use that money to support households and businesses.

Perhaps most important in the short term, Europe has managed to fill 83% of its storage for winter with the help of LNG and diminished consumption because of high prices.

Storage levels have kept rising even after the Nord Stream 1 cutoff, raising hopes Europe can weather the storm. Gas prices have fallen to their pre-cutoff level, although they are still painfully high.

WHAT’S RUSSIA’S GAME?

Even as gas sales dwindled, skyrocketing prices helped maintain Russia’s income from those sales. Oil and gas imports were initially exempt from sanctions because Europe was dependent on Russian energy. Europe has banned Russian coal and will ban most Russian oil at the end of the year.

Russia’s revenue from fossil fuel exports reached 158 billion euros from February to August, according to the Helsinki-based Centre for Research on Energy and Clean Air.

But oil has tended to be the Kremlin’s main moneymaker, and unlike gas in fixed pipelines to Europe, can be sold worldwide by tanker. And the gas relationship with Europe may be gone for good — and with it, any influence it might have brought.

“The gas flows from Europe no longer play a role in my calculations,” German Vice Chancellor Robert Habeck said. “The only reliable thing from Russia are lies.”

So if Putin thinks he has any leverage from gas, time is running out for him to use it. This week, he threatened to cut off energy supplies completely to the West in response to price caps.

“Russia has lost nothing now that it hadn’t lost already … this winter is the last chance to use the gas weapon, successfully or not,” tweeted Janis Kluge, an expert on the Russian economy at the German Institute for International and Security Affairs.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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EXPLAINER: Europe struggles to cope with Russia gas shutoffs