Germany agrees with Canada energy sources to say goodbye to Russian gas

Germany is looking for new sources and suppliers of energy with which to supply itself in the medium and long term to park its still strong dependence on Russian gas, aggravated by Putin's veiled threat to turn off the tap.

Thomas Osborne
Thomas Osborne
23 August 2022 Tuesday 02:47
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Germany agrees with Canada energy sources to say goodbye to Russian gas

Germany is looking for new sources and suppliers of energy with which to supply itself in the medium and long term to park its still strong dependence on Russian gas, aggravated by Putin's veiled threat to turn off the tap. Meanwhile, it is immediately working on gas storage to face a winter that promises to be difficult, both for the energy needs of industry and for homes in terms of heating.

In this context generated by Russia's war against Ukraine, the Foreign Minister, Olaf Scholz, and the Minister of Economy and Climate, Robert Habeck, have traveled to Canada to sign an agreement for the long-term reception of green hydrogen and for other bilateral pacts . This move follows Scholz's recently declared support for the revival of the Midcat gas pipeline project, which would connect Spain and Portugal with France to bring Algerian gas to the heart of Europe, and other attempts to diversify German energy imports.

At a press conference this Monday in Montreal, Scholz and his host, Canadian Prime Minister Justin Trudeau, insisted on the importance of green hydrogen for the future, but the latent message is how Europe will get through this winter. "It is important that we do not fall into Putin's trap," the German chancellor said. “We will do what we can” to help short-term energy supply, Trudeau promised.

Germany would also like Canadian liquefied natural gas (LNG), but Canada currently has no export terminals, and building them would take years. Significantly, Trudeau said his country will “explore ways to see if it makes sense to export LNG and if it is a viable business to export LNG directly to Europe; economic talks are underway between Canadian and German companies.” The German trip to Canada is three days, with stops in Toronto and Stephenville, on the island of Newfoundland, where hydrogen technologies are being developed.

Putin's continued threat to cut off the tap on Russian gas sent to Germany – from where it is then distributed to other European countries – via the Nord Stream 1 gas pipeline in the Baltic Sea adds to the nervousness of the energy debate in Berlin.

In the long term, Germany also hopes to be able to supply itself with Qatari liquefied gas – it will build two reception terminals – and with green hydrogen from the United Arab Emirates (UAE), in addition to American liquefied gas and Norwegian green hydrogen.

But the goal right now of the German government is to store gas for the winter. Deposits are now at 79.5%. By ministerial order, by October 1 they must be 85% full and by November 1, 95%. Not only production but also heating must be guaranteed, since half of German homes are heated with gas. On Sunday, before embarking on a trip to Canada, the Minister of Economy, the environmentalist Habeck, called not to panic, but asked to save. “Germany must consume 15 to 20% less gas than usual. If we manage to do that, we have good options to spend the winter”, he stated in Berlin.

The Social Democrat Scholz hopes that the gas supply difficulties in Germany will end by the end of 2023. Meanwhile, he is worried about the reduction in flows. The concern grows after the announcement on Friday by the Russian energy giant Gazprom of the three-day closure for maintenance of Nord Stream 1, maintenance not scheduled on the calendar. The ten-day annual closure that took place in July was planned, and that already caused tensions.

As a result of the energy emergency and other factors, Europe's leading economy faces a more than likely recession, while inflation continues to accelerate and could reach a maximum of more than 10% this fall, according to the Bundesbank, the bank German central bank, in its monthly report for August.

With large industry highly exposed to Russian gas, Germany is one of the European countries most vulnerable to any power outage, and the current rise in costs is already affecting factory output. "The decline in economic output in the winter months is now much more likely," says the Bundesbank in its report. The high degree of uncertainty about gas supply this winter and the sharp price increases are likely to weigh on households and businesses.”

Central bank experts forecast a contraction in German GDP in the second half of this year and that this could lead to a recession in the first quarter of 2023.