European gas surges 24% after Russia claims it’s missing a turbine. Germany sees a ‘politically motivated’ squeeze

Moscow tightened its gas flows to the European bloc for the second day in a row on Thursday and prices surged 24%, forcing European countries to face the reality of how reliant they remain on Putin’s massive gas reserves.

Russia says it cut the amount of gas sent through Nord Stream 1—a key pipeline running from Russia to Germany—due to technical issues at the plant. A key gas compressor unit was not delivered to the Portovaya compressor station and Gazprom subsequently has to cut output at the plant to 67 million cubic meters a day, Gazprom tweeted on Thursday.

But Germany has hit back on Russia’s claims of technical issues, calling the reductions “politically motivated.” Germany’s Deputy Chancellor Robert Habeck said that “it is obviously the strategy to unsettle and drive up prices.”

The price of gas across the bloc has now risen 46% this week and companies including Italy’s Eni, France’s Engie, and Germany’s Uniper all said that their gas supply had been cut.

And while the Kremlin said on Thursday the cuts were “not deliberate,” experts don’t agree.

“It seems really quite politically motivated,” Caroline Bain, chief commodities economist at London-based economic research firm Capital Economics, told Fortune. She added, “The Europeans are to be believed that there aren’t really technical problems and it does seem to be quite deliberate.”

Gas rations

In late May, the EU agreed to cut 90% of Russian oil imports by the end of the year, but that has left the union heavily reliant on that energy source for the time being. Russian oil and gas imports accounted for 61% of supply in the first 100 days of the war, buying around $59 billion worth of oil since Feb. 24, according to a report out Tuesday by independent research group the Centre for Research on Energy and Clean Air (CREA).

Russia is also cutting its gas supply to Europe at a time when inflation is hitting record highs across the bloc. Prices in the eurozone went up by 8.1% in the month of May, hitting a record high for the seventh month in a row.

Germany, the biggest buyer of Russian gas before the war broke out, has urged citizens to start rationing power amid energy supply cuts from Russia, with Habeck saying “every kilowatt-hour helps in this situation.”

What now?

Bain calls what is happening in Europe a “triple whammy.”

Last week, even before Russia curtailed gas exports out of its pipelines, Freeport LNG, a major liquefied natural gas export facility in Texas that was supplying Europe with gas, burst into flames. It announced on Wednesday that the outage will extend longer than initially anticipated. On top of that, major gas fields in Norway are also undergoing maintenance, cutting supply to dire levels.

“This is the perfect storm. We first of all had that fire in the U.S. LNG plant. Now we have Russia containing flows through Nord Stream, and we’ve also got maintenance in Norwegian gas fields,” Bain told Fortune.

Any disruption can now lead to a huge move in prices. “If we get another outage like what happened at the Freeport LNG in the U.S. prices could easily jump another 50%,” Ron Smith, senior oil and gas analyst at BCS Global Markets told Bloomberg.

Europe will now rely on whatever U.S. LNG it can get to secure its spare supply, which will come at a steep cost to outbid Asian buyers. “Everything suggests Europe is really going to struggle to increase its stocks further over the next while,” Bain said.