Europe needs to plan for Russia stopping all gas exports, says IEA
EUROPE needs to prepare for a complete cut-off of Russian gas supplies, the head of the International Energy Agency (IEA) has warned.
Fatih Birol said recent cuts to gas flows from Russia appeared to be “strategic behaviour” which was “geared towards making it harder for Europe to fill up its gas storage, which in turn increases Russia’s leverage over European countries in the winter months”.
He said he “wouldn’t rule out” Russia continuing to find excuses to further reduce gas supplies, or even cut them off completely. “This is the reason Europe needs contingency plans for if Russian gas is completely cut off,” he added.
“This is currently not the main scenario, but it is a scenario that we cannot afford to exclude.
“This is the reason why the IEA is talking with European governments to prepare contingency plans.”
The IEA, whose members are OECD countries, was set up to secure energy supplies in the wake of the 1970s Arab oil embargo.
Europe is heavily dependent on Russian gas, typically sourcing about 40pc of its supply from Russia before the war began. It now wants to reduce imports to stop funding the Kremlin, but a sudden embargo would have a severe economic impact across the bloc.
It would also affect the UK, which buys only a small amount directly from Russia but is heavily connected to European markets. Worst-case scenarios modelled in Whitehall indicated about 6m UK homes could face power cuts this winter if Russian supplies to Europe are cut off.
The risk of disruption has already helped keep wholesale gas prices at record highs, pushing up inflation in
Europe and the UK. In the UK, house- hold energy bills climbed 56pc to £1,971 in April and it is estimated they could hit £3,000 in October.
CF Industries, a fertiliser producer, last month announced it was shutting down its Ince manufacturing plant in the face of high gas and carbon prices.
Industrial gas demand in the UK is down 49pc year-on-year in the UK, according to analysts at Citi, although it is not clear to what extent that is down to high prices or other factors.
Analysts at S&P Global Platts said high gas prices had forced oil refineries in Europe to switch gas for liquids such as fuel oil or liquified petroleum gas. Russia last week restricted the amount of gas sent through the Nord Stream 1 pipeline to Germany, claiming it needed equipment that was being held up by sanctions.
Germany’s BDI industry association has warned that a halt to Russian gas would trigger recession in Europe’s largest economy. Russia has already cut off gas supplies to the Netherlands, Denmark, Finland, Poland and Bulgaria after they refused to meet the Kremlin’s demands to pay for gas in roubles.
The UK, Netherlands and Germany are preparing to fall back on coal-fired power plants if there is major further disruption to gas supplies this winter.
In the UK, EDF has agreed to keep its West Burton A coal-fired power plant open for back-up supply and it is expected that Uniper and Drax will follow suit.