European natural gas prices shot up Monday after Russia indefinitely stopped supply into Germany through the Nord Stream 1 pipeline.
Nord Stream 1 is an offshore pipeline connecting Russia’s gas reserves to European energy markets. It is the largest pipeline for natural gas from Russia to Europe, and its operation is seen as crucial to preventing a deepening of Europe’s energy crisis.
Russia’s decision to suspend the flow through the pipeline caused natural gas prices to rise by as much as 36% on Monday, adding to an already-strenuous energy crisis impacting Europe. In addition, the Euro dropped to its weakest level against the U.S. dollar in nearly two decades, falling as low as $0.9879 in early trading on Monday.
Gazprom, the Russian state-controlled gas company, had initially closed the pipeline for three days of maintenance but said it would not resume exports late on Friday, citing an oil spill in a turbine.
On Monday, Russia announced it was stopping the flow indefinitely, initially citing the oil leak but later confirming its political motivations.
Russia’s gas exports would not fully resume until the “collective West” lifts its sanctions against the country, said Dmitry Peskov, a spokesperson for Russian president Vladimir Putin.
Some European leaders see Gazprom’s latest actions as another sign that the state-controlled gas company cannot be relied upon.
“Gazprom’s announcement this afternoon that it is once again shutting down Nord Stream 1 under fallacious pretenses is another confirmation of its unreliability as a supplier,” said Eric Mamer, chief spokesperson for the European Commission.
Leaders in Europe have frequently accused Putin of using the energy crisis as a weapon against world leaders that implemented financial and economic sanctions on the country because of Russia’s invasion and occupation of Ukraine.
In July, Gazprom reduced the flow of natural gas to Germany through the Nord Stream 1 pipeline to just 20% of its capacity.
“Russia’s ongoing weaponization of energy supplies continues to increase downside risks for European economies and the euro,” said Lee Hardman, currency analyst at MUFG Bank.
The energy crisis has caused many European energy leaders to agonize over the prospect of severe supply shortages and rolling blackouts this upcoming winter, as reported by The Dallas Express.
“Given the gas supply tightness, one cannot exclude mandatory gas curtailment for non-essential industries or even ‘rolling gasouts‘ this winter depending on the weather,” analysts at JPMorgan said.
In addition to the indefinite halt of Nord Stream 1 outflows, OPEC announced Monday that itself and allied oil-producing nations would cut oil output in October.
U.S. crude increased 3.3% to $89.79 per barrel following the announcement, while international benchmark Brent crude futures rose 3.7% to $96.50.