Gas, Germany in crisis after the cut from Russia. “Industries risk collapse”

The cuts in the supplies of natural gas from the Russia risk bringing entire sectors of industry to their knees in Germany. To sound the alarm is Yasmin Fahimi, at the head of the German Trade Union Confederation (DGB): «Due to gas bottlenecks, entire industries risk permanent collapse: aluminum, glass, chemical industry. Such a collapse would have enormous consequences for the entire economy and employment in Germany, ”says Fahimi in an interview with Bild am Sonntag. Economy Minister Robert Habeck warned on Friday about the risk of a possible wave of bankruptcies among utilities due to gas supply problems. In this case, a clause would be triggered that allows suppliers to raise prices for consumers regardless of contractual agreements.

THE BLOCK

The chemical industry, which employs around 346,000 people, is Germany’s third largest sector, according to Germany Trade & Invest, the country’s investment promotion agency. As Insider reports in an in-depth study, Germany – which is the main European economy – depends on natural gas coming from Russia, which covers 35% of its imports. Germans buy almost all the gas they use abroad, equal to about a quarter of the country’s total energy mix, as reported by the Ministry of Economy. The Russian state giant Gazprom has already reduced gas flows to Germany through the main Nord Stream 1 pipeline by 60%, motivating it with the blocking of equipment in Canada following the sanctions resulting from the war in Ukraine. And now Berlin fears that the situation could worsen with the scheduled closure of Nord Stream 1 for maintenance from 11 to 21 July. The concern is that it is the first step towards a total stop: the president of the Federal Network Agency, Klaus Muller, does not hide that the routine maintenance of the pipeline could “turn into a political maintenance that will last longer”. And if the flow of gas from Russia were to stop “for a long time, then we will have to talk seriously about saving in energy consumption,” warns Muller.

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OCCUPATION

Last week, Minister Habeck announced that natural gas flows may not resume after the planned works and this would have an impact on fuel storage before the winter, when demand increases. “We are not dealing with irregular decisions, but with an economic war, completely rational and very clear,” said Habeck. Last month, Germany entered the second phase of its three-phase gas contingency plan after Russia slowed supplies. If the situation worsens, the country could start rationing natural gas in the last of the three phases of the plan, as indicated by the Ministry of Economy. According to the emergency program, the industry would be at the forefront of supply cuts, a move with devastating repercussions on the economy and which would lead to the loss of many jobs, German managers and unions agree. Rationing, writes the Bloomberg agency, quoting Habeck, would primarily affect factories not connected to residential networks.

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COMMERCIAL DEFICIT

Since the beginning of the year, Dutch natural gas futures have more than doubled and the country’s energy crisis is already bringing inflation to record levels: “This threatens social stability,” reflects Yasmin Fahimi. And as has not happened for thirty years, Germany records its first monthly trade deficit: the data released today relates to May and marks a red of one billion euros, the first since 1991. To send the German trade balance negative. were the drop in demand for made in Germany globally, as well as slowdowns in production, and the increase in the costs of imported products. Exports thus fell by 0.5% to € 125.8 billion while the value of imports rose by 2.7% to € 126.7 billion, more than expected. In particular, exports to the European Union decreased by 2.8% and those to Great Britain by 2.5%. Sales to the United States rose (+ 5.7% on May 2021), while those to China were almost unchanged (+ 0.5%). Exports to Russia were 54.6% lower than the year before, however May recorded a significant recovery in flows to Moscow with an increase of one billion euros (+ 29%) compared to April. Imports from Russia fell 9.8% to 3.3 billion. The Russian invasion of Ukraine and the Covid-related blockades in China are putting international supply chains in serious difficulty, with substantial repercussions for the highly export-oriented German economy. Over the past 15 years, German monthly surpluses have almost always fluctuated between 15 and 20 billion euros, now prices for imports of energy, food and components used by producers have increased by more than 30% compared to a year ago. Chancellor Olaf Scholz has put in place a “concerted” national action to combat inflation and today there will be a first meeting between the parties involved to counter the energy crisis and its consequences on the pockets of the Germans. Scholz wants solutions to emerge from a dialogue with trade unions, employers, the Bundesbank, experts and economists. The increase in energy costs, he said, could become a “social bomb” and the federal government will have to “further commit itself to measures to aid citizenship”.

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Gas, Germany in crisis after the cut from Russia. “Industries risk collapse”


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