Germany's production might shut down if Russian gas halted: Habeck
Germany's Economy Minister warns that Europe's largest economy might be forced to shut production if Ukraine's gas transit agreement with Russia is not extended beyond 2024.
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An employee turning a valve of a gas installation during a training exercise for handling emergencies at a gas-pumping station on the gas pipeline in the small town Boyarka in the Kive region, Ukraine, April 22, 2015. (AFP)
Europe's largest economy could end up shutting down industrial production if Ukraine's agreement with Russia to transit gas to Europe is not extended, Germany's Economy Minister Robert Habeck warned on Monday.
The gas transit deal, which is set to expire at the end of 2024, is still a main source of energy for countries such as Italy, Austria, Hungary, and Slovakia, and remains a source of revenue for Kiev, which earns transfer fees by allowing gas passage through its territory.
On May 2, the Federal Statistical Office Destatis said that Germany had officially fallen into recession, revealing that the country's GDP recorded a growth decline in two consecutive quarters.
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In an economic forum in eastern Germany's Bad Saarow, the Vice Chancellor cautioned that policymakers should avoid “making the same mistake again” of presuming that the economy will not be impacted without preparing plans to secure energy supplies.
“There is no secure scenario for how things will turn out,” he stressed.
Germany will have to export gas to Eastern European countries to fill potential demand gaps in accordance with EU rules of sharing energy shortage burdens, leaving German producers with limited or even no gas supplies, he added.
This will make establishing the planned LNG terminals north of the country, a project that would increase storage capacity but is opposed by locals and evniormental activist groups, vital to maintain energy flow to Eastern Germany and Eastern Europe, Habeck said.
The Center on Global Energy Policy published a report last week stating that the current terms of the transit gas agreement are unlikely to remain the same even if it was extended.
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“Direct negotiations between Ukraine and Russia on the extension of the transit contract look highly implausible in the current environment,” the report said, citing a lack of political consensus.
Last week, Europe's statistics agency Eurostat announced the Eurozone officially entered a recession.
Predictions of a recession in the Eurozone go back as far as the first months which followed the start of the conflict in Ukraine. However, in November 2022, the EU Commission published a report titled 'Autumn 2022 Economic Forecast: The EU Economy at a turning point, where it projected a recession nearing ahead.
