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Getting what they asked for by putting sanctions on Russia, German officials are rationing hot water, dimming street lights, and closing swimming pools as natural gas prices continue to soar after Russia cut back natural gas exports to Europe last month.
“The situation is more than dramatic,” Axel Gedaschko, head of GdW, a federation of German housing businesses, said to the Financial Times.
“Germany’s social peace is in great danger,” he warned.
Yesterday [11 July], Russia shut down Nord Stream 1, its main gas pipeline into Germany, for 10 days of maintenance.
“Many in Berlin fear it will never reopen,” the FT said.
Last month, German economy minister Robert Habeck activated the second stage of a gas emergency plan that cut some volumes to industry. Now the shortage is extending to households.
“The situation is tense and we can’t guarantee it will not get worse,” Habeck said last week. “We have to be prepared for the situation to become critical.”
In March and April, German industry’s gas use dropped by 11 percent and household consumption by 6 percent, according to a study by Berlin’s Hertie School, a private university.
Households are dusting off woodstoves and cleaning fireplace flues. Sales of coal, firewood, and wood pellets have jumped, the FT noted.
The war in Ukraine and resulting Western sanctions will drive up consumers’ energy prices by 71 to as much as 200 percent this year, GdW said.
The annual cost of energy could add as much as an additional €3,800—equivalent to about $3,900—for a four-person household, compared to last year, it noted.
Prices could rise even higher, thanks to a measure underway in Germany’s parliament.
The measure would place a surcharge on all gas consumers, with the extra money being used to help keep gas importers from going bust.
If that were to happen, the entire energy sector could face a 2007-style meltdown, government officials fear, according to the FT.
Surging energy costs and the European Central Bank’s plan to raise interest rates when its governors meet next week has raised the prospect of a European recession from 30 percent to 45 percent, according to economists polled by Bloomberg last week.
TREND FORECAST: Germany is Europe’s most powerful economy. Its exports drive a significant share of the world’s economic activity. The German government’s restrictions on gas to industry are a blow to global efforts to sidestep a recession.
If Russia fails or refuses to reopen Nord Stream 1 later this month, Europe will fall into economic chaos, sparking social unrest and pressuring officials to abandon sanctions against Russia and cave to Putin’s demands.