IEA: Europe Should Prepare For Complete Russian Gas Shutdown

By Irina Slav of OilPrice.com

Europe should prepare for a complete suspension of Russian natural gas deliveries, the head of the International Energy Agency told the Financial Times in an interview.

“Europe should be ready in case Russian gas is completely cut off,” Fatin Birol told the FT. “The nearer we are coming to winter, the more we understand Russia’s intentions,” he added. “I believe the cuts are geared towards avoiding Europe filling storage, and increasing Russia’s leverage in the winter months.”

As a means of countering the worst effects of such a scenario, Birol advised European governments to keep nuclear power stations running and take other contingency measures, too. These other contingency measures seem to focus on demand.

“I believe there will be more and deeper demand measures [taken by governments in Europe] as winter approaches,” Birol told the FT, adding gas rationing was a distinct possibility in case of further cuts to Russian gas supplies.

In the past three months, Russia has cut off supply to several European countries that refused to pay for gas in rubles. It has also substantially reduced the flow along the Nord Stream, effectively cutting off supply to France and reducing flows to Germany by some 60 percent.

Gazprom and its equipment maintenance service provider Siemens Energy have blamed the reduction on a turbine delivery delay resulting from new Canadian sanctions against Moscow. Germany has blamed Gazprom.

The European Union’s largest economy is facing a certain recession in case Russian gas flows stop completely, an industry body warned this week. BDI cut its growth projection for Germany to 1.5 percent from 3.5 percent for this year and said that if Russia cuts off the gas, the economy will inevitably slip into a recession.

Meanwhile, to make up for lost gas supply, Germany, Austria, and the Netherlands are restarting coal power plants. The IEA’s Birol defended the move in his FT interview, saying the restart was temporary and whatever the increase in emissions, it would be offset by future renewable energy capacity.