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Europe Holds Its Gas

FILE: Pipes at the landfall facilities of the 'Nord Stream 2' gas pipeline in Lubmin, Germany. Taken 3.7.2022
FILE: Pipes at the landfall facilities of the 'Nord Stream 2' gas pipeline in Lubmin, Germany. Taken 3.7.2022

European Union countries bracing for further cuts in Russian gas supply approved a weakened emergency plan to curb demand on Tuesday after striking compromise deals to limit the reductions for some countries.

With a dozen EU countries already facing lower Russian supplies, Brussels is urging member states to save gas and store it for winter for fear Russia will completely cut off flows in retaliation for Western sanctions over its war with Ukraine.

Energy ministers approved a proposal for all EU countries to voluntarily cut gas use by 15% in the August to March period from the average from 2017-2021.

The cuts could be made binding in a supply emergency, provided a majority of EU countries agree to this. But nations agreed to exempt numerous countries and industries from the binding 15% cut, after some governments opposed the EU's original proposal to apply it to every country.

Ireland, Malta and Cyprus - countries that are not connected to other member states' gas networks and therefore could not share spare gas with other countries in a supply emergency have been exempted from the cutbacks.

German Economy Minister Robert Habeck said the agreement would show Russian President Vladimir Putin that Europe remained united in the face of Moscow's latest gas cuts. "You will not split us," Habeck said.

Hungary was the only country that opposed the deal, two EU officials said.

Europe faces an increased gas squeeze from Wednesday, when Russian's Gazprom said it would cut flows through the Nord Stream 1 pipeline to Germany to a fifth of capacity.

Russia's Gazprom has blamed its latest reduction on needing to halt the operation of a turbine - a reason dismissed by EU energy chief Kadri Simson, who called the move "politically motivated."

Some raised concern that the savings would still not be enough to avert a winter shortage. Levels vary between countries, but the EU has reduced its combined gas use by only 5%, despite months of soaring prices and dwindling Russian supplies.

"Fifteen percent will probably not be enough, given what the Russians have just announced," Irish Environment Minister Eamon Ryan said.

News of the latest drop in Russian supply has driven gas prices higher, adding to the cost of filling storage, while creating incentives to use less.

On Tuesday, the benchmark front-month Dutch contract rose more than 10% and is around 430% higher than a year ago.