EU Proposes 15% Gas Usage Reduction... Putin Warns of Further Supply Cuts (Comprehensive)

Preparing for Russia's Gas Supply Suspension
Some Oppose Mandatory Reduction Measures
Putin Warns Again of 'Supply Cuts,' Blaming Western Sanctions

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Hyunjung] As concerns grow over the possibility of Russia halting fuel supplies, the European Union (EU) is expected to propose a 15% reduction in natural gas usage by member states starting next month.

Bloomberg reported on the 19th (local time) that the EU Commission is set to announce a demand reduction plan to cope with a potential full suspension of Russian gas supplies, which will include this proposal.

The report cited three EU diplomats familiar with the matter, stating that the so-called 'Gas Saving for a Safe Winter' plan is scheduled to be announced on the 20th. The plan also includes provisions for mandatory measures if supply worsens or voluntary reductions prove insufficient. The Commission, the EU's executive body, is expected to propose a phased approach that includes reducing heating and cooling as well as market-based measures.

Energy supply instability, including gas supply interruptions, could pose serious risks to the entire European economy. According to Bloomberg's estimates, if related issues worsen this winter, the EU's regional gross domestic product (GDP) could decline by 1.5%. Russia's gas supply cuts have affected 12 EU member states, and Germany raised its gas risk alert to the second-highest level last month.

[Image source=Yonhap News]

Last month, inflows from Russia were less than 30% of the 2016?2021 average. Earlier, Russian state gas company Gazprom reduced natural gas supplies through Nord Stream 1, which connects Russia and Germany via the Baltic Sea, to 40% of the previous level. This was due to a gas pipeline turbine under repair by Germany's Siemens Energy not being returned. Gazprom announced it would conduct a ten-day scheduled inspection of the Nord Stream 1 pipeline starting on the 11th of this month.

However, concerns have been raised that Russia may not resume supplies even after the inspection ends on the 21st, as a way to pressure for the lifting of international sanctions against itself. On that day, Russian President Vladimir Putin warned of further supply reductions. At a press conference, Putin said that one more gas turbine on Nord Stream 1 had broken down, stating, "There were two turbines operating, transporting 60 million cubic meters per day. If one turbine does not return, only one remains. That means 30 million cubic meters." According to the Associated Press, a daily supply of 30 million cubic meters is about one-fifth of Nord Stream 1's maximum capacity. Putin pointed to Western sanctions as a cause of the turbine repair delays, asking, "Is this Gazprom's fault?"

Regarding Western countries discussing a price cap on Russian oil, Putin said, "I have heard the crazy idea of limiting oil exports and imposing a price ceiling," adding, "The result will be the same: prices will rise. Prices will soar."

Meanwhile, the reduction plan reported by the news agency requires approval from member states, and the Commission may request approval at an emergency meeting of energy ministers as early as next week. It is known that many countries have already prepared emergency plans and that there are considerable voices opposing mandatory reductions, arguing that demand will decrease even without such measures.