Gas prices across the UK and Europe are on course to return to record highs, after Germany said that a controversial pipeline from Russia could not be approved due to deepening tensions on the Ukrainian border.
The German foreign minister, Annalena Baerbock, said the Nord Stream 2 pipeline could not be given the green light in its current form because it did not meet the requirements of the EU energy law.
Baerbock said that the escalating tensions on Russia's border with Ukraine, where the Kremlin has reportedly amassed 100,000 troops, was also a factor because Berlin agreed with the US that the pipeline should not be used as a political weapon in Moscow's deteriorating relationship with Kyiv.
The benchmark gas price of Europe climbed by around 10% on Monday to a high of €116.75 142.56 a megawatt hour MWh, just shy of the record closing price of €116.775 MWh set in early October, according to market price data from ICIS.
The UK gas market price climbed to 296.35 p a therm on Monday, just below the record closing price of 298.475 p on 5 October, according to ICIS data.
Europe has experienced record high gas prices in recent months due to a global squeeze on gas supplies. This has been compounded by a slowdown of Russian gas exports to the continent as negotiations over Nord Stream 2 have stalled.
Baerbock s rejection of the pipeline followed a decision last month to suspend the permission process because the project's ownership structure did not comply with the EU's gas directive.
Tom Marzec-Manser, head of gas analytics at ICIS, said some energy traders had held out hope that the pipeline would be able to deliver some gas this winter, and had reacted to signs of a further delay by driving prices back towards record highs.
Dmitry Peskov, a Kremlin spokesman, told Interfax that the Nord Stream 2 development company was working with the regulator and fulfilling all its demands. We just need to be patient. Germany has been under pressure from the US to block Nord Stream 2 because of concerns that Russia could use the pipeline as a political weapon. The pipeline runs from Russia to Germany under the Baltic Sea, bypassing Ukraine. According to critics of the Kremlin, this could make it easier for Russia to increase military aggression towards Ukraine.
The US and EU fear a threat to Ukraine by Russia, which annexed Crimea in 2014. Around 100,000 Russian troops are currently deployed along the Russia-Ukraine border, according to Kyiv.
In October s record UK gas market highs ignited fears that factories would shut this winter to guard against the financial blow of rocketing costs. The surge in prices is likely to take a toll on Britain's struggling energy supply market after the collapse of 24 suppliers in a little over 12 weeks and record hikes in home energy bills.
The European Commission is proposing a voluntary system for EU countries to buy gas together to form strategic reserves to protect against a supply squeeze caused by a surge in demand and lower exports from Russia.