G7 controls price of Russian oil, Moscow cuts gas pipelines

A “broad coalition” of G7 nations has been called upon to implement the decision, which was finalized on Friday during a virtual summit of finance ministers from the seven most industrialized countries.

“Today the G7 took an important step towards achieving our twin goals of putting downward pressure on global energy prices, while depriving (Vladimir) Putin of revenue to finance his brutal war in Ukraine,” immediately congratulated US Treasury Secretary Janet Yellen.

Russia, for its part, condemned the “absolutely ridiculous” move before it was made official, and later announced that Russian company Gazprom’s Nord Stream gas pipeline, connecting Russia to northern Germany, would resume service on Saturday. The day’s interruption for maintenance activities will finally stop “completely” until the turbine of this main pipeline for the supply of Europeans is repaired.

In a press release, Gazprom said it discovered an “oil leak” in the turbine during a technical inspection related to this maintenance operation at a compressor station located in Russia on Friday evening. The Russian team reports that the leak occurred in “cables connected to the rotor’s tachometers.” He posted a photo on Telegram showing cables surrounded by a brown liquid.

These technical issues prevent it from ensuring “safe operation of the gas turbine engine,” Gazprom maintains, relying on a warning from the Russian civil industrial watchdog.

“No technical reason” is sufficient

“Until the repair (…), the gas transport through Nord Stream will be completely stopped”, the group pointed out, without specifying how long the repair would last. But for German turbine manufacturer Siemens Energy, an oil spill alone cannot, from a technical point of view, justify the shutdown of a gas pipeline.

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“As a turbine manufacturer, we can confirm that such a discovery does not create a technical reason to stop operations,” Siemens Energy said in a statement, adding that in the past “this type of leak has not led to a stoppage of operations”.

Charles Michael, President of the European Council, said: “Gazprom’s decision is obviously not surprising. But the use of gas weapons will not undermine the Union’s resolve. We are going to accelerate our efforts for energy independence.

The rebound will heighten concerns among Europeans, who are struggling to avoid an energy crisis this winter and accuse Moscow of using gas as a weapon to retaliate against Western sanctions after the Russian offensive in Ukraine. Earlier in the day, the Kremlin said only one turbine was operating there and that Nord Stream’s business was “under threat” due to a shortage of spare parts due to sanctions aimed at Moscow.

Moscow says the sanctions prevent the return of a Siemens turbine sent to Canada for repairs. Germany, where the turbine is located, ensures that it is Russia that prevents the return of this key piece.

Winter is coming…

Since the start of the Kremlin’s military intervention in Ukraine, at the end of February, Russia has already cut gas supplies via other pipelines to several EU countries, such as Bulgaria and Poland.

Also, in July, Gazprom already carried out ten days of maintenance work on the Nord Stream gas pipeline, after which it was restarted, but there was a further drop in supply. Fears of a complete halt to Russian supplies now seem to be confirmed as winter approaches.

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To make up for the missing volume, Europeans are finding other suppliers and trying to reduce their consumption amid skyrocketing gas prices in markets and the threat of recession. Economy Minister Bruno Le Maire said a total cutoff to Russian gas could reduce French growth by a point.

In Germany, activity is expected to contract in the second half, weighed down by the impact of rising energy prices in the powerful industrial sector. However, in Europe’s largest economy, the threat of gas shortages this winter appears to be receding. The country is struggling to reduce its dependence on Russia, which reached 55% of gas imports in February.

“The situation on the gas market is tense, but security of supply is guaranteed,” said a spokesman for the German Economy Ministry.

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