Thirteen EU countries completely or partially cut off from Russian gas

The Nord Stream 1 pipeline temporarily closed for maintenance on August 31

The gas-receiving compressor station of the Nord Stream 1 natural gas pipeline in Lubmin, Germany. Bloomberg

Thirteen EU countries have either completely stopped receiving Russian gas or are partially cut off from the supply after the temporary closure of the Nord Stream 1 pipeline, according to Russia's state-run Tass news agency.

The news agency quoted a senior official from the Directorate General of the European Commission for Energy in its report on Thursday.

"As you know, Nord Stream 1 has been closed for maintenance since yesterday, that is, there are no Russian gas supplies to Germany and neighbouring EU countries," the official said.

Russian state energy company Gazprom confirmed on Wednesday that Nord Stream 1 was closed temporarily for maintenance from August 31 until September 3.

Gazprom, which cut the supply through the 1,224-kilometre pipeline to 40 per cent of capacity in June and to 20 per cent in July, said that the "only gas compressor unit" currently in operation needed technical maintenance.

"Upon the completion of the maintenance operations, provided that no malfunctions are identified, gas transmission will be resumed at the rate of 33 million cubic metres per day," the company said last month.

Germany, the main recipient of gas supplies via the pipeline, is prepared for the outage, officials said on Wednesday.

"I assume that we will be able to cope with it," Klaus Mueller, president of the German network regulator told Reuters.

"I trust that Russia will return to at least 20 per cent from Saturday, but no one can really say."

Also on Wednesday, Gazprom said that it will stop gas supplies to French energy company Engie over payment issues, a move that increases the risk of a widening supply gap.

However, France is more sheltered than many European countries from the surge in gas prices caused by Russia's decision to reduce its exports to Europe after the start of its military offensive in Ukraine in February.

Italy and Germany are the two largest European countries most vulnerable to a gas supply shock given their heavy use of natural gas and significant dependency on Russia, S&P Global Ratings said in a report on Thursday.

In 2020, almost 60 per cent of Germany's natural gas supply was piped in from Russia, largely on long-term contracts.

The Russia-Ukraine conflict has led to an energy crisis across Europe, with August emerging as the most expensive month on record for power tariffs in the bloc, Rystad Energy said this week.

Italy was the first market to register a monthly spot price above €500 ($500.15) per megawatt hour, as the average for August climbed to €547 per MWh, with France averaging €492 per MWh, followed by Germany at €465 per MWh and the UK at €438 per MWh.

European Commission president Ursula von der Leyen has said that plans were being drawn up for an “emergency intervention” to stop high gas prices from driving up electricity costs.

The commission's crisis plan currently targets member states to reduce gas consumption by 15 per cent between the beginning of last month and March 31, 2023, with provision for it to become mandatory if necessary.

Some of the proposed measures include energy savings by lowering heating and air cooling, fuel substitution where feasible and acceleration of renewables investment.

In a scenario of Russia completely cutting off gas supplies to Europe, this would "restrict supply specifically for winter heating and industrial production", according to S&P.

"As a result ... European gas prices would increase significantly," the report said.

Apart from the effect on industrial production, higher gas prices across Europe would also lead to a further surge in inflation from the end of the year, reducing households’ real incomes, consumer spending, and, ultimately, gross domestic product growth, S&P said.

"Europe faces a winter in flux. Given continuing uncertainty about the physical war in Ukraine, the proxy economic war with Russia involving sanctions, energy, food, and other materials only appears to be escalating," the report said.

"With no end to the conflict in sight, and Russia tightening the noose on natural gas flows to Europe, the continent is bracing for a bleak winter ahead."