See What Russia Did To Europe As Inflation Hits Another Record

See What Russia Did To Europe As Inflation Hits Another Record

Russia has temporarily halted natural gas deliveries to Europe through a vital pipeline and cut off all supplies to a French utility, deepening an energy crisis that has sent inflation in the region to a record high of 9%.

Russian state energy giant Gazprom cut all deliveries through the Nord Stream 1 pipeline on Wednesday in what it said was a planned shutdown until Saturday for maintenance work.

Nord Stream 1 is a key artery carrying Russia’s vast gas supplies to the continent — the pipeline accounted for about 35% of Europe’s total Russian gas imports last year — and flows directly to Germany, the bloc’s biggest economy.

In recent months, Gazprom has slashed flows through Nord Stream 1 to just 20% of capacity, citing maintenance issues and blaming Western sanctions on exports of technology imposed in response to Russia’s invasion of Ukraine.

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Russia has also cut off supplies to several “unfriendly” European countries and energy companies over their refusal to pay for gas in rubles, as the Kremlin insists, rather than the euros or dollars stated in contracts. European leaders say Russia is trying to blackmail countries over their support for Ukraine.

France’s Engie (EGIEY) is the latest casualty. On Tuesday, Gazprom said it would completely suspend deliveries to Engie from Thursday, claiming that it had not received full payment from the company for the gas it supplied in July.

Engie said in a statement on Tuesday that the shutoff was “due to a disagreement between the parties on the application of contracts.”

Both shutoffs deliver yet another blow to Europe. Since Russia’s invasion of Ukraine in late February, a sharp drop in Moscow’s energy exports to the European Union have sent the cost of gas and electricity soaring, stoking concerns that it will face shortages over the winter and raising prices across the economy.

Inflation hit 9.1% in August across the 19 countries that use the euro, according to an initial estimate released Wednesday by the EU statistics office. That’s the highest level since the bloc started keeping records in 1997.

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Energy prices were the single biggest driver of inflation, jumping 38% in the year to August.

European benchmark gas prices rose nearly 6% to hit €284 ($284) per megawatt hour in early trade on Wednesday, but have since fallen back slightly. They could spike higher again if Nord Stream 1 remains offline after Saturday, or if flows resume at a much reduced rate, as the bloc tries to stockpile more gas ahead of winter.

Countries across the European Union have already hit their target to fill gas storage facilities to at least 80% of their capacity before November.

German Chancellor Olaf Scholz said Tuesday his country was “much better prepared” in terms of securing gas supply for this winter “than was forseeable a few months ago.”

“We can deal quite well with the threats that are coming our way from Russia,” he said.

But ample storage may still not be enough to ward off a full-blown energy crisis if Russia decides to abruptly shut off all deliveries to Europe.

Fatih Birol, executive director of the International Energy Agency, warned last month that the “next few months will be critical.”

“If Russia decides to completely cut off gas supplies before Europe can get its storage levels up to 90%, the situation will be even more grave and challenging,” he said in a statement.

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