All financial eyes are on the Nord Stream 1 pipeline — Europe’s largest gas import infrastructure. Russia has the pipeline “hostage,” and one event’s outcome in seven days could send Europe into crisis mode…
All eyes are on the Nord Stream 1 pipeline, Europe’s largest gas import infrastructure.
The pipeline carries gas from Russia to Germany and is being used as a bargaining chip in the Russian/Ukraine war.
How important is it? Over 55 billion cubic meters (bcm) of gas flows through the pipeline each year (~35% of the European Union’s 155 bcm of natural gas imported in 2021).
- On Monday, the pipeline was shut down for maintenance — scheduled to be restarted on July 21. But everyone is afraid that Russia won’t turn the pipelines back on.
- A suspension could lead to skyrocketing gas prices and major gas shortages — a nightmare scenario with Russian gas flows already reduced by 60% in recent months.
Per Liberum Capital Head of Strategy Joachim Klement, “there simply is no substitute available for Russian gas” (BBG).
Mild doomsday scenario: The outcome in seven days could send Europe into crisis. Here’s one scenario if Russia stops gas deliveries per UBS Group economists:
- European stocks fall 20%.
- The Euro falls below 90 cents.
They emphasized that these are “rough approximations and by no means as a worse-case scenario.”
Many investors believe Russia will turn the pipes back on, but Germany’s energy regulator isn’t ruling out a scenario where the gas imports aren’t resumed (CNBC).
Mind games: Per Bloomberg’s energy and commodities columnist Javier Blas, Russia may want to keep some gas flowing for bargaining chips.
