What you need to know about the Gazprom-Siemens Energy tussle

As winter comes closer, European leaders are facing a difficult question of how to keep their people warm amidst a sharp decline in natural gas supply from Russia, which has sent energy bills soaring. 

To mitigate the effects of the looming crisis, European leaders are now exploring a host of options including subsidies, capping the profits of oil and gas firms and encouraging consumers to use less electricity during peak hours. 

Russia, which has historically been the 27-member European Union’s single largest supplier, threatens to make matters worse by permanently switching off the supply. 

Gazprom, the Russian state-run energy giant, has drastically reduced gas flow in the Nord Stream 1 pipeline, citing technical reasons. 

But European leaders blame Russian President Vladimir Putin for deliberately reducing the gas flow in the pipeline at this critical juncture to wedge a divide within the EU, which has imposed back-breaking economic sanctions on Moscow. 

“There’s no technical justification for why Gazprom cannot use the pipeline. And even if there were, it could send gas to Germany by other routes. It has chosen not to do so,” says John Lough, associate fellow, Russia and Eurasia Programme at the UK-based think-tank Chatham House.

“The Kremlin is trying to put maximum economic pressure on European countries to persuade them to stop supporting Ukraine and to drop sanctions against Russia,” he tells TRT World. 

Economists warn Europe can experience a recession soon if the energy crisis persists. 

A broader economic downturn amidst record-high inflation has led to public discontentment and frustrated crowds have taken to the streets in Czech Republic, Germany and Italy, putting the spotlight on what Brussels will do to ease the energy woes. 

Natural gas has assumed a critical position in the EU energy supply chain as it’s used to heat homes, run factories and generate electricity.  

Who’s to blame? 

Last year, Europe met roughly 40 percent of its gas demand from Russia. That share has now dropped to only 9 percent. Russia uses a network of pipelines to export gas to Europe. 

To offset that dependence, EU has increased import of liquified natural gas (LNG) from the US. But overall, LNG still meets a small part of the EU's gas requirement when compared with pipeline gas. 

The Nord Stream 1 pipeline, which runs under the Baltic Sea, from the Russian town of Vyborg to Lubmin in Germany, is by far the largest source of gas deliveries, carrying up to 59.2 billion cubic metres of gas a year.

Since Russian forces crossed over into Ukraine in February, the United States, EU and their allies have made it difficult for Russia to do business with the rest of the world. 

Gazprom says international sanctions have blocked the routine maintenance needed to keep Nord Stream 1 functioning. 

Besides Nord Stream 1, Russia supplies gas to Germany via the Yamal pipeline, which passes through Belarus and Poland. Other pipelines bring gas to Europe via Ukraine and Türkiye.  

All the pipelines have been sitting on idle capacity and have the ability to carry huge gas volumes for European consumers who have seen a 400 percent jump in gas bills since August 2021 due to shortages. 

Trouble at Portovaya 

Gazprom runs the Nord Stream 1 pipeline, which started pumping gas to Germany in 2011. 

At the Portovaya compression plant on the Baltic Sea coast, jet engine-sized turbines ensure the gas flows over the 1,200km-long pipeline. Gazprom relies on Munich-based Siemens Energy for the maintenance of turbines. 

For the last couple of months, Gazprom officials including the company's deputy chief executive Vitaly Markelov have pointed out many of the eight turbines at the compression plant have gone out of order one after another because they need repairs. 

International sanctions on Moscow have hampered the regular maintenance of the turbines, Putin said in recent comments. 

Earlier this month, the last turbine, which was still in operation, was switched off by Gazprom on the pretext that it had an oil leak and Siemens Energy had the contractual obligation to fix it. 

“Regarding oil leaks, we are aware of the recent reports. As the manufacturer of the turbines, we can only state that such a finding is not a technical reason for stopping operation,” a Siemens Energy spokesperson said in an emailed response. 

“Such leakages do not usually affect the operation of a turbine and can be sealed on site. It is a routine procedure during maintenance work.” 

Gazprom insists that the last remaining turbine in operation must be shipped out of Portovaya for repairs. 

Another turbine has been awaiting shipment in the German city of Mulheim for several weeks after it was repaired at a Siemens Energy facility in Canada. Moscow has refused to take the delivery citing fears of getting caught up in the sanctions web. 

For now EU members have stored sufficient gas in the underground tanks to deal with any surge in demand. 

Storage tanks were filled to 84 percent of the capacity as of September 14 compared to 33 percent in February, according to GIE, an association of European gas utilities that keeps track of the data. But those reserves can deplete fast without fresh intake from Russia. 

“Russia is using energy for leverage because Europe will get poorer this winter. The question is how much poorer and what are the additional costs of that,” says John Bowlus, an Istanbul-based energy analyst. 

“That is to say that the turbine is just an issue to make this case more plausible to the public,” he tells TRT World.