Russia makes further 20% cut in gas supply as Europe plans curbing consumption

In what could trigger an energy standoff between Russia and the European Union, Moscow’s state-owned energy company Gazprom on Wednesday halved the amount of natural gas flowing through a major pipeline Nord Stream 1 to 20 percent of capacity.

It's the latest gas supply reduction that Russia has blamed on technical problems but Germany has called it ‘a political move’ to sow uncertainty and push up fuel prices amid the war in Ukraine.

The move comes a day after EU countries approved a weakened emergency plan to curb gas demand by 15 percent, hoping lower consumption will ease the impact in case Moscow stops supplies altogether.

The Russian energy giant announced Monday that it would slash flows on the Nord Stream 1 pipeline that runs to Germany because of equipment repairs.

It's raised new fears that Russia could completely cut off gas that is used to power industry, generate electricity and heat homes to try to gain political leverage over Europe as it tries to bolster its storage levels for winter.

Data on the Nord Stream website and the head of Germany's network regulator, Klaus Mueller, confirmed the reduction.

“Gas is now a part of Russian foreign policy and possibly Russian war strategy,” Mueller said.

Natural gas prices have surged on Europe's TTF benchmark to levels not seen since early March and are nearly six times higher than they were a year ago.

Soaring energy prices are fuelling record inflation, squeezing people's spending power and heightening concerns that Europe could plunge into recession if it does not save enough gas to get through the cold months.

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That fear led EU governments on Tuesday to agree to reduce natural gas use to protect against further Russian supply cuts.

The draft law aims to lower demand for gas by 15% from August through March with voluntary steps.

If there aren't enough savings, mandatory cuts would be triggered in the 27-nation bloc.

Russia, which has reduced or cut off natural gas to 12 EU countries since the war, insists that the new drop-off through Nord Stream 1 is because maintenance is needed on a turbine for a compressor station and another turbine sent for repairs in Canada has been delayed.

It has said the paperwork for the return of the second turbine has raised questions about Western sanctions.

European leaders and analysts say the reductions are a pretext to try to divide EU countries and elevate prices.

“The developing situation seems to support our view that recent Russian cuts in flows are a purposeful deterioration in gas trade due to geopolitical escalations," James Huckstepp, manager for Europe, Middle East and Africa gas analytics at S&P Global Commodity Insights, said in a research note Tuesday.

“That being the case, it increases our scepticism around Russian imports in the months ahead," Huckstepp said.

Russia recently has accounted for about a third of Germany's gas supplies.
The government said last week that the drop in gas flows confirmed that Germany can't rely on Russian deliveries, announcing that it would step up its gas storage requirements and take further measures to conserve supplies.