Russia's latest attempt to put Europe in a crisis may lead to rationing of gas

Russia has been facing sanctions from the West for months now. In retaliation, Russia was threatening to cut off its gas supply to the West. It would seem that the threat has been put into action.

Cutting off the gas supply

As reported by The Financial Times, Russia had started to reduce the quantity of gas being sent to Germany in June. Indeed the key pipeline between Germany and Russia was cut to 40%.

European politicians then accused the Russian government of using its gas as a weapon in retaliation for the sanctions placed on the country.

Reducing Europe’s reliance on Russian gas

To try and reduce the chance of falling into a complete crisis, Europe has been trying to supply its gas elsewhere so they aren’t as reliant on Russia, who represented 40% of Europe’s supply before the invasion of Ukraine.

For example, Italy is now getting the majority of its gas from Algeria.

According to the BBC, the UK would not be directly impacted by this as it only imports 5% of its gas from Russia, but it will have an effect on the price.

What does this mean for common households?

If Europe is unable to find another gas supplier, it may lead to a rationing of gas. Citi economists and strategists said in a note Tuesday, July 26, as reported by CNBC:

As plans for energy rationing for winter get agreed upon, we expect that tighter financial conditions in Europe will induce a much worse reaction in the real economy, given the stance in savings, household leverage and corporate balance sheets. Winter is knocking on Europe’s door.

It is also a possibility that households will face a shortage of gas according to The Financial Times.

Only time will tell how this crisis will play out, especially since Russia is unpredictable and has on occasion upped the amount of gas sent to Europe, just to then cut it again.

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