More than 60% of chemicals imported by Germany, not including pharmaceuticals, comes from other EU countries, according to the German Chemical Industry Association, or VCI, which includes many of the country’s largest chemicals and pharmaceutical companies. “The whole EU stands to suffer if any single economy enters into a sharp and long-lasting recession,” as a result of an interruption in gas supplies, German insurer Allianz SE wrote in a recent report. Given how tightly integrated the continent’s economy is, such a move would quickly ripple outward. German legislation gives households and institutions such as hospitals priority for gas supplies, making it more likely that industry would be first to face rationing in case of a shortage. The production of steel, copper and ceramics would also be severely affected. Such an event would disrupt pan-European supply chains, particularly in the petrochemical sector, which depends on gas and petroleum as a raw material, said Günther Oettinger, a former EU energy commissioner and German politician. Industry executives and economists say a gas shortage severe enough to force rationing in any one European country-especially in Germany, the bloc’s largest economy-would inevitably be felt across the continent. German industry also makes raw materials and components, from glass to plastics and other chemicals, that are crucial to other manufacturers across Europe and beyond.Įuropean manufacturers in gas-hungry industries have been switching to alternative fuels like oil and coal where possible, and stockpiling chemicals and other crucial ingredients ahead of winter, when gas is in higher demand, according to business and trade officials. Germany is highly dependent on Russian gas, and it also acts as a transit hub for gas headed to Austria, the Czech Republic and Ukraine.
A fresh round of supply-chain disruptions may be on the horizon. That’s one problem, but so is the effect that a complete shutdown of Russian gas supplies to Germany may have on industrial production in that country, and by extension, on production elsewhere on the continent. The writers of the Journal piece (Bojan Pancevski and Jenny Strasburg) also note the hub role played by Germany in the European gas market. Gazprom didn’t immediately respond to a request for comment. Uniper said it had rejected the claim as unjustified. On Monday, utility Uniper SE, Germany’s biggest buyer of Russian gas, said it had received a letter from Russia’s state-owned Gazprom PJSC that claims force majeure-a legal declaration that exempts the company from fulfilling contractual obligations due to circumstances outside its control- to justify past and current shortfalls in gas deliveries. The timing of the letter it refers to is nothing if not suggestive. On the other hand, one possible conclusion to draw from this story in the Wall Street Journalis that the gas will not be turned back on. For Putin to make the most of his advantage, the best time to turn off the taps is probably early winter - but who, outside the Kremlin, really knows what his thinking is?
My best guess is that, when the maintenance works on the Nord Stream 1 pipelines are completed, which ought to be in a few days, Russian (natural) gas will resume flowing to Germany, albeit at the sharply reduced levels seen before the maintenance cut-off.
Pipes at the landfall facilities of the Nord Stream 1 gas pipeline in Lubmin, Germany, March 8, 2022.
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