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Germany has halted the opening of the Nord Stream 2 gas pipeline in response to Russia’s escalation of the crisis in Ukraine.
Separately, EU ministers unanimously agreed a package of sanctions on Russia, shortly after separate British sanctions were imposed on five banks and three oligarchs.
German Chancellor Olaf Scholz said he had ordered a rethink on the pipeline in light of what he called a changed security environment in Europe.
Speaking in Berlin on Tuesday, Mr Scholz said this was a “necessary administrative step so that the pipeline cannot be certified at this time”.
Germany had previously resisted calls from the US and Britain, as well as Ukraine, to scrap the trans-Baltic pipeline over fears that Russia will use it as a geopolitical weapon.
But Ukraine lauded Mr Scholz for changing course on Tuesday, with Foreign Minister Dmytro Kuleba welcoming what he called a “morally, politically and practically correct step in the current circumstances".
Russia responded with a warning that consumers in Europe would face even higher prices after a winter surge in gas and electricity costs.
“Welcome to the brave new world where Europeans are very soon going to pay 2,000 euros ($2,270) for 1,000 cubic metres of natural gas,” said Dmitry Medvedev, Russia's former president and now a member of Vladimir Putin's security council.
The EU’s foreign policy chief, Josep Borrell said: “We are in a particular dangerous moment for Europe.”
Ukrainian President Volodymyr Zelenskyy had earlier demanded an immediate halt to Nord Stream 2 after Russia granted recognition to two breakaway regions in eastern Ukraine and ordered troops there in a so-called peacekeeping mission.
“These are very difficult hours and days for Europe,” said Mr Scholz, who was meeting Irish leader Micheal Martin hours before the EU was set to unveil separate sanctions on Russia.
He described Russia's actions as a “grave breach of international law” but said diplomatic efforts would continue to prevent a further escalation.
Russia brushed off the pipeline's suspension and other looming sanctions. “Moscow is not afraid of anything,” the Tass news agency quoted Deputy Foreign Minister Andrei Rudenko as saying.
Construction on Nord Stream 2 was completed last September but it needs approval from German regulators before it can go into operation.
Mr Scholz inherited the dilemma from his predecessor, Angela Merkel, who supported Nord Stream 2 and described it as purely an economic project.
He did not rule out a future opening date for the pipeline but said officials in Germany's Economy Ministry would rewrite their analysis of Germany's energy security in light of the latest developments.
Europe is under pressure to reduce its reliance on Russian gas for both political and environmental reasons, but Germany expects to rely on the fossil fuel for an interim period as it switches off coal and nuclear plants.
In Britain, Prime Minister Boris Johnson said Europe had not done enough on this front after Russia's annexation of Crimea in 2014. He later welcomed Germany's decision as a “brave step” and “the right thing to do".
“We didn't do enough as Europeans to wean ourselves off Russian hydrocarbons, off Russian oil and gas,” he said. “We've got to make sure that we cut the umbilicus, we snip the drip feed into our bloodstream from Nord Stream.”