Hot water may be rationed in Germany as Putin’s gas squeeze tightens

On the weekend, Hamburg environment chief Jens Kerstan reportedly said that “warm water could only be made available at certain times of the day in an emergency” in the case of an acute gas shortage. He also said the city-state might have to lower the maximum room temperature that people can achieve on its heating network.

Meanwhile, Germany’s energy regulator said pharmaceutical companies and paper manufacturers would be among the companies getting prioritization in the event of gas rationing this winter. Klaus Mueller, head of the Federal Network Agency, said it was not possible to “classify every business as systemically important.”

Households and hospitals will also be prioritized over most industry under federal plans, though Kerstan warned that this would not be technically possible everywhere in Hamburg.

Throttled gas supply

Since mid-June, Russia’s Gazprom has heavily throttled the amount of gas it sends Germany through the Nord Stream 1 pipeline under the Baltic Sea. The move has forced Germany’s left-leaning coalition government to grudgingly turn back to filthy coal for short-term electricity generation.

Germany’s main importer of Russian gas, Uniper, is now only getting 40% of what it contractually ordered from Russia, and the stratospheric cost of substituting for those flows has pushed it into crisis—Reuters reported Monday that the German government may have to provide a massive bailout for the energy giant, and perhaps take a stake in it as a last resort.

However, what’s happening now is nothing compared to what’s anticipated in the coming weeks.

On July 11, Gazprom will close Nord Stream 1 for scheduled maintenance. The German government does not expect it to turn the pipeline back on again anytime soon, due to the Kremlin’s political considerations—some economists believe Moscow has profited so much from soaring fossil-fuel prices that, with sanctions and fleeing multinationals limiting its ability to spend the cash, it now feels emboldened to turn off the taps.

Russia has already stopped supplying gas to Poland, Finland, the Netherlands, and other European countries that have rebuffed its demand to pay in rubles.

A complete cessation of Russian gas flow would make it extremely difficult for Germany to increase gas storage levels to the desired 90% by the time winter arrives; the current level is 61%.

At the moment, Germany is on the second alert level of its emergency gas plan. Without enough gas later this year, it would be forced into the third and final alert level—which is where rationing comes in, particularly when winter arrives.

Economy Minister Robert Habeck recently warned of a “Lehman Brothers effect” in the energy markets, if gas supplies continue to fall and prices keep rising.

Over the weekend, German Federation of Trade Unions head Yasmin Fahimi added a further warning that “entire industries are in danger of permanently collapsing: aluminum, glass, the chemical industry,” due to Russian gas cuts.

That would be a hammer blow to Europe’s biggest economy, which is already taking damage from inflation—a phenomenon that’s partly down to Vladimir Putin’s war in Ukraine.

On Monday, Germany reported its first trade deficit in over three decades. Economists expected a €3 billion ($3.1 billion) surplus for May, but thanks to the soaring costs faced by manufacturers—not least in energy—they got a billion-euro deficit instead.