German industry is reportedly preparing to institute gas rationing in Europe’s largest economy as Vladimir Putin’s Russia cut off shipments to Finland, which has launched an application to join the NATO military alliance.
The Federal Network Agency of Germany, locally known as the Bundesnetzagentur (BNetzA), is reportedly drafting action plans to implement gas rationing in response to Russian leader Vladimir Putin’s demands that unfriendly nations purchase natural gas from Moscow in rubles rather than Western currencies such as the dollar or euro.
According to a report from the Reuters news agency, BNetzA — which regulates energy in Germany — said: “Depending on the seriousness of the shortages … it could be necessary … to cut supply of gas to some users to zero.”
Germany, even after government measures to lessen dependency on Russian oil and gas, still receives around 35 per cent of its gas imports from Russia, sparking concerns among business leaders that should the supplies be cut off, there could be massive implications for the German economy, which is already experiencing its highest level of inflation in over 40 years.
The president of the BNetzA regulator, Klaus Mueller said that any rationing system would focus on keeping critical and profitable industries running, however, because of the interconnectedness of modern supply chains, it will be difficult to predict potential knock-on effects of shutting down certain businesses.
According to the report, the government is planning on reimbursing firms should they cut gas consumption through halting production in order to free up supplies for more critical industries.
Another plan would be to auction off rights to gas access, however, a lobbying group for small to mid-size companies in Germany, dubbed BVMW, has argued that this will prioritise big businesses that can afford to pay higher prices for energy.
“To auction gas rights is not fair,” explained Hans-Juergen Voelz, the group’s chief economist. “Big, financially strong companies have a much higher pain threshold in such auctions than a mittelstand (medium-sized) company.”
The German economy has been left reeling in the wake of the Russian invasion of Ukraine, with the EU powerhouse facing a potential recession should Russia shut off the taps. Unlike neighbouring France, the German government has pursued a policy of denuclearisation, vowing to shut down all of its reactors in favour of so-called green alternatives like wind and solar.
Yet the policy has left them beholden to Russia for natural gas — a fact that was a frequent criticism levied at the country by former U.S. President Donald Trump.
The potential of gas rationing in Germany comes as Russia’s state-owned energy firm Gazprom shut off pipeline shipments of liquid natural gas to Finland on Saturday, Helsingin Sanomat reported.
The Finnish newspaper said that the shutdown was related to Finland’s state-owned energy firm Gasum refusing to pay Russia in rubles for gas supplies. However, it also noted that the move was likely linked to the decision of the traditionally militarily neutral Finland to join the Western military alliance of NATO this week.
Gasum has claimed that they have prepared for this eventuality, with Gazprom making its initial threats to shut off supplies in April, and therefore Finland should still have enough gas to meet its needs.
“It is very unfortunate that the supply of natural gas under our supply contract will now run out. However, we have prepared carefully for this situation, and if there are no disruptions in the gas transmission network, we will be able to supply gas to all our customers in the coming months,” said the President and CEO of Gasum Mika Wiljanen.
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