As European Leaders Visit Kyiv, Putin Cuts Their Gas Supply

Source: : 2022-06-16 20:48:19 : Katrin Bennhold and Melissa Eddy

BERLIN — As the leaders of Europe’s three biggest economies appeared in Kyiv on Thursday to send a message of support to Ukraine, President Vladimir V. Putin of Russia had his own message for them: Don’t forget, your industries are at my mercy.

With inflation already near a 40-year high, gas prices surged further as Russia cut flows to Europe’s most important natural gas pipeline for the second day in a row on Thursday. Germany, Italy, Austria and the Czech Republic all reported shortfalls.

Gazprom, Russia’s state-controlled gas giant, said repairs were to blame for the squeeze. But European officials openly accused Mr. Putin of using energy supplies as a weapon, burying any last shred of the notion that, on energy at least, Moscow was a reliable partner.

Gas exports have given Moscow a potent diplomatic tool on the continent, where large swathes of industry depend on Russian energy. As Chancellor Olaf Scholz of Germany, President Emmanuel Macron of France and Prime Minister Mario Draghi of Italy met with President Volodymyr Zelensky in Kyiv, Mr. Putin reminded them he has his finger on the gas tab — and the fate of European economies in his hand.

“We, Germany and other countries believe that these are lies,” Mr. Draghi told reporters at a news conference in Kyiv on Thursday when asked about the drop in gas flows and Gazprom’s stated repairs. He compared it to Russia’s blockade of other Ukrainian exports: “In reality, there is a political use of gas, like there is a political use of grain.”

It’s not the first time Mr. Putin has strategically cut Europe’s gas supplies since the war started. Last month, Russia suspended electricity exports and gas shipments to Finland after the country abandoned its longstanding neutrality and formally requested NATO membership.

In April, Moscow halted natural gas supplies to Poland and Bulgaria, two NATO countries that have been especially vocal in their opposition to Russia in the war.

Gas exports are vital for Russia’s economy, but the supply cuts, far from hurting Moscow, have increased prices so much that they have more than paid for themselves. Some Russian officials and gas executives have barely hidden their glee.

“Yes, we have a decrease in gas supplies to Europe by several tens of percent,” Alexei Miller, chief executive of Gazprom, told the annual St. Petersburg International Economic Forum on Thursday. “Except that prices rose not by tens of percent, but several fold. So I won’t bend the truth if I tell you that we bear no grudge.”

Russia’s deputy prime minister, Alexander Novak, speaking at the same conference, said Europeans were paying some 400 billion euros more than before the cuts, and hinted at more reductions to come.

“This is not the limit in our opinion,” Mr. Novak said. “Everything can be much more critical.”

With most Europeans not heating their homes during the summer, and air-conditioning relatively rare across the continent, the situation is tolerable for now. Officials in all four countries insisted that the drop did not represent an imminent threat.

But Europe’s dependency on Russian gas, built up over decades, is proving hard to roll back quickly. It took only weeks for the European Union to agree on a Russian coal embargo, and by last month countries had weaned themselves off Russian oil enough to add that to the sanctions list.

Gas is another story.

In Germany, Europe’s largest economy and Russia’s most important gas client on the continent, one in two homes is heated with gas, and gas powers much of the country’s vaunted export industry. Germany’s powerful industrial lobby, the Federation of German Industry, said that companies were already switching to coal, making more natural gas available to refill storage tanks for the winter, but that the transition would take time.

“Since the start of the Russian war in Ukraine, German industry has been reducing its gas consumption in power generation as quickly as possible,” the group said.

Russia’s war on Ukraine set off an alarm for Germany, which for decades had bet that economic interdependence with Moscow would keep the peace in Europe — and that, even in moments of geopolitical tension, Russia could be trusted as a supplier of energy.

Until Russia’s invasion of Ukraine, Berlin happily relied on Moscow for more than half of its gas imports, a third of its oil and half of its hard coal imports, ignoring warnings from the United States and other allies about the leverage this gave Russia. Quitting that habit will not be easy in the short term without a shock to the German economy, which, like others in Europe, is still recovering from the pandemic.

The government is taking steps to make Germany independent from Russian coal by the end of summer, and from Russian oil by the end of the year. Already, the share of oil imports from Russia has fallen to 20 percent, and Russian coal imports have been halved.

Gas, on which Germany is banking as a bridge toward its goal of a carbon-neutral economy by 2045, has proved far harder to disentangle from the economy.

Robert Habeck, Germany’s economy minister and vice chancellor, has said becoming independent from Russian energy would take at least two years. But this week he urged Germans to help accelerate the process by saving more energy.

“The time to do this has arrived,” Mr. Habeck said in an appeal posted to Instagram on Wednesday. “Every kilowatt-hour helps in this situation.”

“Putin is reducing the amount of gas. Not all in one go, but step by step,” Mr. Habeck said. “That confirms what we have feared from the start.”

Even as politicians sought to reassure Europeans, the head of Germany’s federal agency for monitoring gas and power networks warned that if Gazprom continued to curtail flows, the situation could become more dangerous as temperatures drop.

Such concerns are shared elsewhere in Europe, where several countries depend on Russian gas arriving via Germany.

“Should Putin limit gas supplies to Germany in the longer term, it is practically certain the inflation in the Czech Republic will hit 20 percent by the end of the summer,” Lukas Kovanda, chief economist at Trinity Bank, said on Twitter. “If he turns it off completely it might be well above that.”

The Czech Republic’s main gas provider, CEZ, reported that its supplies from Gazprom had been reduced to about 40 percent of its usual volume, Ladislav Kriz, a spokesman for the company, said on Thursday. The Czech minister of industry and trade, Jozef Sikela, said reserves could last until the end of October.

Austria’s OMV energy company said that Gazprom had informed it of cuts, but declined to offer further details. Both the Czech Republic and Austria are among Europe’s most vulnerable countries when it comes to Russian gas, relying on Moscow for almost all their natural gas supplies.

Italy, which imports 95 percent of its gas, buys 40 percent of that from Russia. Gazprom’s supply to Italy fell 15 percent on Wednesday, and remained there on Thursday, the Italian energy company Eni said. The reduction was also linked to the reduced flows through the Nord Stream 1 pipeline connecting Russia to Germany, and the Russian energy company blamed necessary maintenance.

But European leaders did not buy the explanation. Roberto Cingolani, Italy’s minister for ecological transition, linked the squeeze directly to the prime minister’s trip.

“Today, Draghi is in Kyiv and this may be a small manifestation of retaliation,” Mr. Cingolani said.

Gaia Pianigiani contributed reporting from Siena, Italy, and Hana de Goeij from Prague.

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