European gas prices have surged by as much as 30% after Russia said that one of its main gas supply pipelines to Europe would remain closed indefinitely, prompting renewed fears of shortages and gas rationing in the European Union this winter.
The benchmark gas price went as high as 272 euros per megawatt hour (MWh) after the market opened following Russia’s announcement on Friday that a leak in the Nord Stream 1 pipeline meant it would stay shut following last week’s three-day maintenance halt.
The Dutch TTF October gas contract had eased to 256 euros, up 23% on the day but almost 400% higher than this time last year. Price surges through 2022 have fueled inflation and forced some industries to halt production.
Europe has accused Russia of weaponizing energy supplies in retaliation for Western sanctions imposed following the invasion of Ukraine in February. Russia in turn accuses the West of waging economic war and says sanctions have hampered pipeline operations.
The Nord Stream 1 pipeline, which runs under the Baltic Sea to Germany, has historically supplied about a third of the gas Russia exported to Europe. Prior to last week’s shutdown though it had only been operating at 20% of capacity.
Russian gas supplies via Ukraine, another major route, have also been reduced, leaving the EU facing the possibility of gas shortages over the winter. Several countries have triggered emergency plans that could lead to energy rationing, raising prospects of a recession.