Germany's union warns of collapse of industries due to cuts in Russian gas

Top German industries could face collapse because of cuts in the supplies of Russian natural gas, the country’s top union official warned before crisis talks with Chancellor Olaf Scholz starting Monday. 

“Because of the gas bottlenecks, entire industries are in danger of permanently collapsing: aluminum, glass, the chemical industry,” said Yasmin Fahimi, the head of the German Federation of Trade Unions (DGB), in an interview with the newspaper Bild am Sonntag. “Such a collapse would have massive consequences for the entire economy and jobs in Germany.”

The energy crisis is already driving inflation to record highs, she said. Fahimi is calling for a price cap on energy for households. The rising costs for Co2 emissions mean further burdens for households and companies, Fahimi added. The crisis could lead to social and labor unrest, she said.  

Economics Minister Robert Habeck said on Saturday that the government is working on ways to address the surging costs both utilities and their customers face, without giving details. Earlier he had warned that the squeeze on Russian gas supplies risks creating deeper turmoil, likening the situation to the role of Lehman Brothers in triggering the financial crisis in 2008.

Russia has reduced shipments through Nord Stream pipeline by 60% and the pipeline is scheduled for a full shutdown this month for maintenance. Germany has raised doubts that Nord Stream will resume supply after that.

Warning of a potential total breakdown of Russian gas supplies, Germany’s top power grid regulator called for greater efforts to save energy.

There’s now a question of whether upcoming annual summer maintenance on the Nord Stream 1 gas pipeline from Russia “will turn into a longer-lasting political maintenance,” Klaus Mueller, head of the Federal Network Agency, told the newspapers of Funke Mediengruppe in an interview.

If flows from Russia are “lowered for a longer period of time for political reasons, we will have to talk more seriously about savings,” Mueller said. Russia’s Gazprom PJSC, which operates the pipeline, plans to perform ten days of work on Nordstream 1 in mid-July.

Mueller also warned of a dramatic increase in gas prices. “Many consumers will be shocked when they get mail from their energy supplier,” he told Funke, adding that prices could triple.  

Germany relies on Russia for roughly one-third of its energy. For months, Russian President Vladimir Putin has gradually reduced supplies of gas in apparent retaliation over sanctions imposed over the invasion of Ukraine. Germany’s government has already triggered the second stage of a three-phase gas-emergency plan.

Analysts at Deutsche Bank warned this week that slowing deliveries of Russian natural gas threaten to push European inflation even higher and may drive Germany, the continent’s largest economy, into “imminent” recession.  

Robert Habeck, Germany’s economy minister, has warned that a squeeze on Russian gas supplies risks creating deeper turmoil, likening the situation to the role of Lehman Brothers in triggering the financial crisis in 2008.

The economics ministry in Berlin wants to allow municipal utilities and private operating companies to pass on higher gas procurement costs to households within weeks, according to newspaper Frankfurter Allgemeine Zeitung.

Without the adjustment, “considerable liquidity problems may arise for the district heating supply companies” that could ultimately threaten the supply of heating to customers, the newspaper reported, citing a government draft.

The new regulation will be anchored in the Energy Security Act as early as July 8, Reuters reported, citing government and industry sources.