(Bloomberg) — Europe’s energy crisis escalated as Russian natural-gas giant Gazprom PJSC said it will halt supplies to French utility Engie SA because of a disagreement over payments.
Gazprom has notified Engie about a full cutoff of gas from Sept. 1 as the utility hasn’t paid in full for July deliveries, the Russian gas producer said in a statement. Earlier, Gazprom said it would reduce gas supplies starting Tuesday. It also plans to shut the Nord Stream pipeline to Germany for three days of maintenance beginning Wednesday.
Moscow has progressively choked shipments of the fuel to Europe in retaliation for sanctions related to its invasion of Ukraine. The cutbacks, which have so far mostly targeted Germany and eastern Europe, have plunged the continent into its worst energy crisis in 50 years, sending prices soaring amid concerns about supply shortages during the coming winter.
“We’re getting ready for the worst-case scenario, which is a complete cut-off,” French Energy Transition Minister Agnes Pannier-Runacher told France Inter radio when asked about Engie on Tuesday, before Gazprom’s announcement of a total halt to gas deliveries. She reiterated that Russia was using gas as a weapon of war.
Gazprom’s move follows Monday’s call from French Prime Minister Elisabeth Borne for businesses to cut energy use or face possible rationing this winter if Russia halts gas deliveries. A much higher than usual number of outages at Electricite de France SA’s aging nuclear reactors is also straining the energy market, sending gas and electricity prices in Europe to records.
Before Gazprom announced the complete halt to gas supplies, Engie said in a statement earlier Tuesday that it already secured the volumes necessary to meet its customer commitments and its own requirements. The company also said it has “put in place several measures to significantly reduce any direct financial and physical impacts that could result from an interruption to gas supplies by Gazprom.”
Governments across the continent are scrambling to cut their dependence on Russian energy and drafting plans to ration fuel if conservation measures fall short. They are also spending tens of billions of euros to partly shield businesses and households from surging bills amid rising risks of recession. The European Union is preparing steps to limit power prices in the short term, and to sever the link between gas and electricity costs longer term.
Read more: European Energy Prices Plunge as EU Plans to Intervene in Crisis
With more than 90% of its gas storage full, France should have enough fuel to cope with a winter with average temperatures, Engie Executive Vice President Claire Waysand said Monday. However, the situation could be tight during potential cold snaps, she added.
European Commission President Ursula von der Leyen said Tuesday that reserves in the European Union have hit an average of 80%, a target the EU had aimed to reach by Nov. 1.
Engie is holding talks with Algeria’s Sonatrach as part of its diversification strategy away from Russian supplies. Those new medium- and long-term contracts with the North African nation wouldn’t kick in this winter, Waysand said.