Russia\u2019s disinformation machine has repeatedly struggled to put an alternative spin on the realities of its devastating war in Ukraine. But it was almost like the Kremlin couldn\u2019t be bothered to come up with a credible explanation for a permanent halt to the flow of gas through the Nord Stream 1 pipeline to Europe on Friday night.<\/p>\n
Even German industrial giant Siemens, which oversees maintenance of the pipeline, was quick to rubbish Russia\u2019s claims that repair work couldn\u2019t be carried out.<\/p>\n
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With Europe determined to wean itself off Russian oil and gas imports according to its own carefully managed time frame, Putin has decided to turbo-charge the split and make it as painful as possible, in an effort to undermine support for Ukraine among European voters.<\/span>Credit:<\/span>AP<\/cite><\/p>\n The whole world understands what\u2019s happening – in closing one of the most important gas supply routes to Europe just hours after the G7 group of countries unveiled plans to impose a price cap on Moscow\u2019s oil exports, Vladimir Putin has pre-empted the West and declared an all-out energy war.<\/p>\n The German economy ministry, along with its French counterparts, was quick to point out that the EU has been hastily preparing for life without Russian hydrocarbons ever since it became clear Putin was willing to weaponise Russian energy exports.<\/p>\n Yet, EU leaders have been less forthcoming about just how ponderous they were in recognising that threat. Indeed the West arrogantly thought that it could continue to rely on Russian energy while simultaneously trying to cripple its economy with sanctions.<\/p>\n Even now, with the EU facing a calamitous energy crunch, the default response among the Continent\u2019s elites is to downplay the impact of the Kremlin cutting off supplies entirely. This is disingenuous in the extreme.<\/p>\n Yes, it\u2019s true that gas supplies to Germany from Russia have shrunk to just 20 per cent of pre-invasion levels. It is also accurate to say that Europe will eventually learn to live without Putin\u2019s fossil fuels. There will be no going back.<\/p>\n But that prospect seems to ignore the bit in between where Europe is forced into a devastating adjustment as it scrambles to find alternative sources of energy both at home and abroad, and customers have to dramatically curb their usage.<\/p>\n Financial markets are at least alive to the potential fallout. The euro sank below $US0.99 for the first time in two decades, while benchmark European gas prices jumped by as much as 35 per cent, in the clearest sign yet of fears that the energy crisis is likely to spark wider economic and financial turmoil.<\/p>\n Investor nerves have been heightened by expectations that the European Central Bank is poised to deliver the largest interest rate increase since the creation of the euro as it fights to bring surging inflation under control.<\/p>\n Economists expect the ECB to raise key interest rates by 0.75 percentage points later this week, after it emerged that prices rose by a record 9.1 per cent in the year to August. It would be the biggest rate rise since the single currency was created in 1999.<\/p>\n Closing down the Nord Stream is an indication of how far Putin is willing to go.<\/span>Credit:<\/span>Bloomberg<\/cite><\/p>\n EU leaders seem more content with lambasting Putin as an unreliable trade partner, as if somehow the jury was still out on that one. Indeed, it didn\u2019t take long for the Kremlin to admit that it is effectively holding Europe to ransom over Nord Stream.<\/p>\n The \u201coil leakage\u201d version of why it was permanently shut down lasted a whole three days before Moscow eventually came clean. Supplies to Europe will not resume in full until the \u201ccollective West\u201d lifts sanctions, Putin\u2019s spokesman Dmitry Peskov said.<\/p>\n It is a race to see who can inflict the most damage on the other side first. With Europe determined to wean itself off Russian oil and gas imports according to its own carefully managed time frame, Putin has decided to turbo-charge the split and make it as painful as possible, in an effort to undermine support for Ukraine among European voters.<\/p>\n It will be the greatest test of European unity since the sovereign debt crisis that engulfed the Continent a decade ago.<\/p>\n In the meantime, European powers are pinning their hopes almost entirely on gas storage facilities, it seems. Brussels has set a goal of filling reserves up to 80 per cent by November but Germany had surpassed that target by the end of August after a mad scramble to secure supplies and has now hit 85 per cent. France is at 92 per cent. Italy has reached 83 per cent.<\/p>\n Backed by government loans, energy providers have spent the summer hoovering up as much gas as possible at any price but officials concede that even at close to full storage, Germany only has enough gas for two and a half months of demand if Russia switched off flows.<\/p>\n Elsewhere, some are holding onto the fact that Nord Stream 1 represents a minority of Germany\u2019s annual demand. Regardless, closing it down is an indication of how far Putin is willing to go. The Bruegel think tank thinks Europe should be braced for a winter with \u201czero Russian gas\u201d.<\/p>\n Behind the scenes, the panic is palpable as Europe is effectively placed on a war footing. Industry has been scaling back production. Price caps and emergency credit lines for power companies facing liquidity problems are likely to be next, EU Commission president Ursula von der Leyen has said. The final stage is to physically limit supplies to factories and other energy-intensive sectors.<\/p>\n Blackouts and rationing are likely to be the precursor to a sharp recession. Living standards will plummet. It will be the greatest test of European unity since the sovereign debt crisis that engulfed the Continent a decade ago.<\/p>\n<\/p>\n