01 Apr 2022, 13:01
Kerstine Appunn

Siemens Energy and BASF warn Russian gas supply cuts would cause severe damage

Handelsblatt / Frankfurter Allgemeine Sonntagszeitung

The heads of Germany’s large, energy intensive companies have warned against severe damages that would be caused by a stop to Russian gas deliveries. “If we cut off Russian gas deliveries, the repercussions will be dramatic,” Christian Bruch, CEO of Siemens Energy told Handelsblatt. For some industries, a steady gas supply is existential, said Bruch. “Just take the glass industry. Once the systems go cold, they're gone,” he said, adding that it was questionable whether the affected companies would invest in Germany again afterwards. Bruch said production without Russian gas would be possible by importing liquified natural gas (LNG) and building up renewables, but not immediately. Delivering LNG gas from terminals in the west to the east of the country would also be difficult, he said.

BASF head Martin Brudermüller even warned of an unprecedented economic downturn that could “submit the German economy into its worst crisis since the end of the Second World War,” he told Frankfurter Allgemeine Sonntagszeitung. An embargo on Russian gas would threaten the existence of small and medium-sized companies in particular, he said, adding that it would take four to five years to substitute the Russian deliveries with other sources. At the BASF plant in Ludwigshafen 40,000 employees could be affected, in addition to many products that are needed in the value chains of groceries and medicines, he said.

More and more companies that are highly depended on natural gas have started to lawyer up, Handelsblatt reports. Manufacturers of steel, glass, food, and pharmaceutical products in particular have suffered under high prices and want to know what compensation claims they have in case of a gas supply cut. Gas suppliers, on the other hand, want to know if they can use “force majeure” clauses (claiming that it is impossible for them to deliver the contracted amount of gas), and therefore are permitted to forego their obligations.

Prices for gas for companies have increased by 51.8 percent in the second half of 2021, the Federal Statistical Office said today. Electricity costs for non-household customers were up 11.8 percent.

Across Europe the question of a full embargo of Russian energy imports, its consequences, and the alternatives are heatedly debated. While a number of economists have said that an immediate embargo could be handled, others have warned of impacts that may hurt European economies more than Russia in the short term. The German government has therefore repeatedly warned against imposing an embargo on Russian fossil fuels while at the same time redoubling efforts to become independent from these deliveries.

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