Europe agrees to compromise gas restrictions as Russia cuts supply

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  • EU ministers agree to urgently reduce gas consumption
  • Voluntary reductions would become binding in the event of a supply emergency
  • The final agreement exempts many countries, industries
  • EU rushes to save gas as Russia cuts supply

BRUSSELS, July 26 (Reuters) – European Union countries on Tuesday approved a weakened emergency plan to limit their gas demand, after reaching compromise agreements to limit cuts for some countries, as they are preparing for further reductions in Russian supply.

Europe faces increased gas shortages from Wednesday, when Russia’s Gazprom (GAZP.MM) announced it would cut flows through the Nord Stream 1 gas pipeline to Germany to a fifth of its capacity. Read more

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

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Energy ministers approved a proposal asking all EU countries to voluntarily reduce their gas consumption by 15% from August to March.

The cuts could be made binding in the event of a supply emergency, but countries have agreed to exempt many countries and industries, after some governments resisted an initial EU proposal to impose a binding cut 15% to each country. Read more

German Economy Minister Robert Habeck said the deal would show Russian President Vladimir Putin that Europe remained united in the face of Moscow’s latest gas cuts.

“You will not divide us,” Habeck said.

Hungary was the only country to oppose the deal, two EU officials said.

Russia’s Gazprom blamed its latest cut on the need to shut down a turbine – a reason dismissed by EU energy chief Kadri Simson, who called the move “politically motivated”.

Russia, which supplied 40% of the EU’s gas before invading Ukraine, said it was a reliable energy supplier.

It also indicates that the invasion, which began on February 24, is a “special military operation”.

OBLIGATION VS. EXEMPTIONS

The EU agreement would exempt from the 15% gas reduction obligation countries such as Ireland and Malta that are not connected to the gas networks of other EU countries.

News of Russia’s latest supply cut has driven gas prices up, increasing the cost of filling storage, while creating incentives to use less.

Early Tuesday, the benchmark Dutch contract for the first month is up almost 10% and is more than 450% higher than a year ago, although it is down from the records reached a few months ago. time after Russia began its invasion of Ukraine.

Countries that meet an EU target to fill gas storage by August could face weaker targets – softening cuts for around a dozen states, including Germany and Italy, on the basis of current storage levels.

They can also exempt from the target the gas they use in critical industries, such as energy-intensive steelmaking.

Additionally, those with limited ability to export gas to other EU countries can claim a lower target, provided they export what they can. This could include Spain, which is not dependent on Russian gas, and said reducing its own demand would not help other countries because it lacks infrastructure capacity to share reserve fuel.

“Everyone understands that when someone asks for help, you have to help. Help can be given in different ways, but I think the spirit of collaboration will prevail,” Spain’s minister for health said on Tuesday. ‘Energy, Teresa Ribera.

The EU plan has tested countries’ solidarity, with Greece and Poland among countries opposed to mandatory gas cuts. Read more

Polish Climate Minister Anna Moskwa said the deal would not impose any constraints on the use of gas in Poland and opposed the idea that a country should reduce its use of industrial gas to help other states facing shortages.

Some EU diplomats have raised concerns that the number of derogations in the final rule could mean it does not allow countries to save enough gas for the winter.

Although governments, including Germany, Europe’s largest gas consumer, have stepped up energy-saving measures, EU countries have only reduced their combined gas consumption by 5% , despite months of soaring prices and dwindling Russian supplies.

“Fifteen percent probably won’t be enough given what the Russians have just announced,” Irish Environment Minister Eamon Ryan said.

The deal requires the backing of a majority of countries to trigger the binding gas cuts, after many opposed the Commission’s initial proposal that it would have the final say.

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Reporting by Kate Abnett, Philip Blenkinsop, Robin Emmott, Marine Strauss, Gabriela Baczynska; Editing by Philip Blenkinsop, Matthew Lewis and Barbara Lewis

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