(Corrects the last sentence to eliminate reference to oil products

FRANKFURT (Reuters – Germany activated the initial stage of its emergency plan to manage European’s gas supply in order to prevent a Russian disruption.

Russia was responsible for half of Germany’s 2021 gas imports and 40% of its first quarter 2022.

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

WHAT’S THE PROBLEM?

Moscow announced last week that it will create a mechanism to allow “unfriendly” nations – the ones behind Russian sanctions against Ukraine’s invasion – to pay gas in rubles. It includes Germany, Europe’s industrial powerhouse and other European allies.

Today, most people pay in pounds or euros.

Habeck, the German minister responsible for Germany’s energy security has rejected Russia’s demands and stated that current conditions would allow contracts to 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 the GAS PLAN IN GERMANY?

Berlin’s Emergency Plan Gas has three levels of crisis.

This is when there are warning signs that a supply crisis could be developing. It has been activated by the government. Alarm is when there’s a disruption in supply or an extraordinarily high level of demand that upsets the normal balance, but it can be fixed without intervention.

When market-based solutions have not been able to resolve shortages, the third stage is called emergency. The Bundesnetzagentur (German network regulator) must make the final decision on how gas supply will be distributed across Germany.

Who IS AFFECTED 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 of German energy giant E.ON stated to ARD that “this means that industrial production loses, and that supply chains become lost.” “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. To ensure sufficient capacity, however, an existing coal exit program might need to be modified under emergency laws.

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 such as 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.

The refineries have the ability to use natural gas for fuel and make hydrogen.