FRANKFURT, (Reuters) – Germany activated the initial stage of an emergency plan for managing gas supplies in Europe’s largest economy to prepare for a disruption or halting supply from Russia.

Russia contributed 55% to Germany’s imports of gas in 2021, and 40% during the first quarter in 2022.

Robert Habeck, Economy Minister has stated that Germany won’t be fully independent from Russian supply before the middle of 2024.

WHAT IS THE PROBLEM?

Moscow stated last week that by March 31, it will have a system in place where “unfriendly” states – countries behind the sanctions on Russia for its invasion of Ukraine, – can pay for gas using roubles. This includes Germany and its industrial superpower, as well as other European allies.

Most people pay now in dollars and euros.

Habeck, the German minister responsible for Germany’s energy security has rejected Russia’s demands and stated that current contracts would be honored.

Russia’s largest German customers include Uniper, RWE, and EnBW’s VNG. All three have long-term gas supply agreements. The companies haven’t commented on the individual plans for disruption.

WHAT IS GERMANY’S GAS PLAN?

Berlin’s Emergency Plan Gas offers three emergency levels.

This is when there is a possibility of a supply crisis developing. It has been activated by the government. Second is the alarm level, which can occur when supply disruptions or extraordinary demand disrupt normal equilibrium but cannot be corrected.

Third level: Emergency, where market-based remedies have failed to address shortages. The Bundesnetzagentur (German network regulator) must make the final decision on how gas supply will be distributed across Germany.

Which PART IS ACTIVATED FIRST?

Germany will not be able to secure sufficient gas if it does not. The industry accounts for 25% of German gas consumption.

Leonhard Birnbaum (chief executive at German energy company E.ON), stated that this means industrial production is lost and supply chains are affected. “We’re certain that we are talking about very severe damages.

Privat households will be given preference over the industry. Hospitals, care facilities, and public institutions that have special needs, however, would not be affected by disruptions.

In theory, electric utilities responsible for 13% gas consumption in 2017 could move to coal burning plants. An emergency law might require that a coal exit plan be altered to make sure enough capacity is available.

Other than energy suppliers, chemicals are also at risk of losing gas. Chemicals use gas for everything, including plastics and fertilizers, as well as making fibres and solvents. Automobile manufacturers rely on chemical products to make products like laquer and batteries.

Union IG BCE, NYSE: has stated that BASF’s Ludwigshafen location could be under consideration for reducing gas supply should they exceed halve.

To make naphtha and other products such as gasoline, jet fuel or diesel, refineries require gas.