Nord Stream re-opens, for now

Tense European leaders let out a sigh of relief today as Russian gas began to flow through the Nord Stream 1 pipeline once again.

After the pipeline was closed for a 10-day maintenance break, there were fears that the Kremlin-backed gas firm, Gazprom, might choose to weaponise this vital energy source by cutting the flow of gas to Europe permanently.  

This sigh of relief was, however, only a shallow one. 

The pipeline is now running at just 40 per cent capacity. Gazprom insists that Western sanctions – and resulting difficulties with obtaining materials required for its full functioning – are to blame. 

The reduction in supply through Nord Stream 1 is preventing countries across Europe from replenishing their gas stores. While the EU – which relied on Moscow for 40 per cent of its total natural gas supplies last year – is scrambling to diversify its supply, replacing Russian energy by the winter isn’t a realistic target. 

Industry leaders are warning that this shortfall in gas could trigger a recession across Europe in the coming months. The ECB raising its interest rate by half a percentage point today, the first hike since 2011, won’t do the EU’s growth prospects any favours, either.

In this context, the resignation of Mario Draghi, Italy’s Prime Minister and former president of the European Central Bank, is far from ideal timing. 

The 74-year-old handed in his resignation this morning following a feud with his coalition government. This will bring months of uncertainty and market jitters to the EU’s third largest economy. What’s more, Draghi supporters argue that the entire bloc is losing a giant of European economics at a time when his expertise is sorely needed. Draghi is largely credited with saving the euro during the eurozone crisis of the 2010s. 

While Gazprom may have chosen to turn the taps on today, EU President Ursula von der Leyen is still preparing member states for the possibility that Putin could choose to cut off gas supplies to Europe entirely this winter. Yesterday, she described this as “a likely scenario”. 

Faced with this fear, VDL is urging member states to reduce their gas use by 15 per cent over the coming months, taking steps such as lowering heat in public buildings. 

It’s an ambitious target. It would require EU countries to triple the rationing achieved to date since the start of the war in Ukraine. 

At present, this proposed target is just a voluntary one. Yet Von der Leyen has requested the power to impose mandatory gas reductions across the bloc.

Her plan is already being met with objections. Spain, Greece and Portugal have all rejected the call for 15 per cent cuts so far, with the Spanish energy minister saying: “Contrary to other countries, Spain hasn’t been living beyond its means in energy terms” – widely interpreted as a dig at Germany. 

The pushback is unsurprising. Energy is one of the areas in which member states are generally much more reluctant to adopt a centralised approach. 

Next Tuesday, VDL’s proposed measures are due to be discussed by the bloc’s energy ministers at an emergency meeting. Spats will no doubt ensue.