Germany should prepare for further cuts in Russian gas supplies because President Vladimir Putin is pursuing a conscious strategy of driving up prices to undermine European unity, Economy Minister Robert Habeck said.
Habeck, the deputy chancellor in Olaf Scholz's government, said on Saturday that we aren't dealing with erratic decisions but with economic warfare, completely rational and very clear. The next one follows a 60% reduction. German leaders are warnings of impending turmoil and natural gas shortages in Europe's biggest economy, which relies on Russia for about one-third of its energy. Putin has gradually reduced supplies after European countries imposed sanctions in response to Russia's invasion of Ukraine.
German utilities are at risk of cascading failures that could require activating a legal clause that would allow them to pass on price increases outside of contract commitments, Habeck said.
Germany has refrained from activating the measure for now because it would lead to an immediate price explosion for consumers, he said at an event sponsored by the Die Zeit weekly. He said that the government is working on an alternative, but he didn't elaborate.
If one company were to fail or other companies were to fail, it's like a domino effect that would lead to a deep recession, he said.
European energy companies are facing a squeeze because Russia curbed flows on a key gas link earlier this month, forcing utilities to buy fuel on the spot market at elevated prices. German factories and businesses are beginning to curb demand because of high power prices, and the government has activated the second stage of a three-stage gas emergency plan.
Russia has reduced shipments through Nord Stream by 60% and the pipeline is scheduled for a full shutdown this month for maintenance. Germany has raised doubts that Nord Stream will resume supply after that.
Russia's goal is to keep energy prices high and destroy the unity and solidarity of the country, Habeck said.
Germany's government and energy giant Uniper SE are talking about stabilization measures. Finance Minister Christian Lindner said any additional government assistance would be in the form of a loan guarantee.
Gas rationing - if it came to that -- presents challenges because the grid isn't separated between residential and commercial customers, Habeck said.
If a factory is connected to the gas network and a whole part of the city is connected to it, then this factory can't be taken out of the network.
That will probably be regulated at the cost of the factories that are not connected to a mixed network, Habeck said.
Household customers in Germany are protected by gas shutoffs.
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