Financial markets have been rattled by the shutdown of Russia’s Nord Stream 1 gas pipeline, as energy pressure on European economies intensifies as winter approaches. The euro fell to a two-year low this morning in early Monday trading after Russian energy company Gazprom extended the shutdown of its gas pipeline to Germany on Friday night.
Concerns over high energy prices and possible shortages pushed the euro further lower against the US dollar, with the single currency hitting $0.9879 for the first time in two decades, its lowest level since December 2002.
Nord Stream 1 was scheduled to resume operations Saturday morning after a three-day shutdown for maintenance. But on Friday night, Gazprom dashed hopes of resuming work, blaming a leak. The pipeline will be shut down completely for turbine repairs. From a technical point of view, the shutdown is considered unjustified by turbine manufacturer Siemens Energy.
Gazprom made the announcement on Friday, shortly after G7 countries agreed to cap the price of Russian oil to support Ukraine. The introduction of a price cap means that countries adhering to the policy may only purchase Russian oil and oil products by sea that are sold at a price lower than or equal to the price cap. Russia says it will not export to countries participating in the restriction.
In response, a number of European governments have unveiled plans to help businesses and consumers deal with rising energy costs. On Sunday, Germany announced a €65 billion package that includes one-off payments for the most vulnerable and tax breaks for energy-intensive companies.
During the weekend, Sweden and Finland also announced support packages of several billion dollars for energy companies.
After approaching its historic record of 345 euros per megawatt hour on August 26, which was set in March at the beginning of the war in Ukraine, the price of European natural gas fell by 37% last week, AFP recalls. After the Russian move, natural gas prices rose today. On Monday, the Dutch wholesale gas price for one month ahead, the benchmark for Europe, rose 26% before falling slightly.
The Nord Stream 1 gas pipeline stretches from the Russian coast near St. Petersburg to northeastern Germany and can transport up to 170 million cubic meters of gas per day. It is owned and operated by Nord Stream AG, whose majority owner is Gazprom.
This is not the first case where the gas pipeline has been shut off since Russia’s invasion of Ukraine.
In July, Gazprom completely shut down supplies for 10 days, citing a “maintenance outage.” Ten days later it was released again but in a much smaller volume.
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