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France accuses Russia of using gas supply as ‘weapon of war’

file photo: pipes at the landfall facilities of the 'nord stream 1' gas pipline in lubmin
File photo

France on Tuesday accused Moscow of using energy supplies as “a weapon of war” as Russian gas giant Gazprom GAZP.MM reduced deliveries to one of its main utilities and prepared to halt flows along the major pipeline to Germany from Wednesday.

European governments are trying to find a response to soaring energy costs for businesses and households and to find alternatives to Russian supply to store for winter.

Western nations fear that Moscow is driving up gas prices to try to weaken their resolve in opposing its invasion of Ukraine, a tactic Ukraine’s President Volodymyr Zelenskiy on Monday dubbed economic terrorism. Moscow denies it is doing this.

The Nord Stream 1 pipeline, the main conduit for Russian gas into Europe, has become a flash point in the economic war between Moscow and Brussels. Europe is already on notice that supplies will be squeezed as Gazprom shuts off Nord Stream 1 from Wednesday to Friday for maintenance.

Kremlin spokesman Dmitry Peskov said on Tuesday that technological problems caused by Western sanctions are the only thing standing in the way of supplying gas via Nord Stream 1.

But France’s Energy Transition Minister Agnes Pannier-Runacher said on Tuesday: “Very clearly Russia is using gas as a weapon of war and we must prepare for the worst case scenario of a complete interruption of supplies.”

She was speaking to France Inter radio after French utility Engie ENGIE.PA said it would receive less gas from Gazprom from Tuesday because of an unspecified contractual dispute. Read full story

Russia has been pumping gas via Nord Stream 1 at only 20% of capacity and there are fears that this week’s outage could be extended.

“There are guarantees that, apart from technological problems caused by sanctions, nothing hinders the supplies,” the Kremlin’s Peskov said when asked if there are guarantees that Gazprom will restart gas flows via Nord Stream 1.

RISING BILL

European energy ministers will hold an emergency meeting on Sept. 9 to discuss the crisis.

Germany, Europe’s largest economy, is open to discussing a price-cap scheme on gas supplies at a European level, a source in Italy said, citing a text message Germany’s economy minister sent to his colleagues across Europe.

The source said Robert Habeck sent a message to European energy ministers flagging that Berlin was open to discuss the price cap at next week’s meeting.

Italian Prime Minister Mario Draghi has been pushing for a price cap, and has also called for steps to decouple the cost of electricity from the gas price. Such a move would allow European households to get the benefits from electricity produced from cheaper sources such as renewables.

There was some respite on Tuesday when benchmark Dutch wholesale gas prices eased as Europe almost reached its target of gas stores being 80% full, the idea of a price cap circulated and traders took profits following record high prices last week.

The front-month gas contract TRNLTTFMc1 was down 3% at 259 euros/MWh on Tuesday morning, off all-time highs hit last week, and is trading at levels more than five times those seen a year ago.

“Any action which caps power prices will limit the profitability of burning gas for power generation which could possibly feed through to lower gas demand,” ING analysts said.

The rising cost of the crisis was illustrated when EU member Austria said that it was preparing to pump billions of euros into the electricity company that supplies much of the capital Vienna after a price surge on power markets left it unable to afford the guarantees needed to cover market transactions.

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