German industry representatives are concerned that production facilities will have to close, which will collapse supply chains in Europe if gas from Russia is cut off.
German business and union leaders warned on Wednesday that any disruption to gas supplies could devastate Europe’s largest economy, which has not fully recovered from the post-supply chain crisis. Covid-19.
The worst-case scenario in the scenario where Russia cuts off gas to Germany is said to involve the world’s largest chemical company BASF. BASF’s main chemical production facility in the western German city of Ludwigshafen is at risk of being partially or completely closed if it runs out of gas.
The president of the German chemical workers association IG BCE Michael Vassiliadi warned about 40,000 workers would have to reduce their hours or be laid off.
Christian Kullmann, head of the German Chemical Industry Association (VCI), also warned that the operating mechanism of chemical plants is very complicated, “cannot be turned on and off like a microwave oven”.
“Once the chemical plants are shut down, they won’t be able to produce for months,” Kullmann said, adding that the disruption would “have a huge domino effect with much of the industry.”
The chemical sector is an important part of Germany’s export-oriented economy, as most industries such as automobiles, pharmaceuticals and construction are indispensable for chemicals. The chemical industry uses about 15% of German gas, the highest of all industrial sectors.
“High energy prices, but above all the scenario of gas supply cuts, will deal a huge blow to the chemical industry, the mother of many German industries,” said Vassiliadi. “The consequence was not only the layoffs of many workers, but also the rapid collapse of industrial production chains in Europe, with consequences across the globe.”
Despite Germany’s claims to reduce dependence on Russian energy, gas from the country still accounts for 40% of Berlin’s total supply, down from 50% before the war in Ukraine broke out. Minister Habeck acknowledged that Germany will hardly find enough sources to replace Russian gas until mid-2024.
When activating the emergency response plan on energy supplies, Minister Habeck said that Germany’s gas reserves are at about 25% capacity. “How long it takes for that gas to run out depends on a number of factors like consumption and weather,” Habeck said, urging consumers and private businesses to cut energy use.
The German Council of Economic Experts predicts that the country’s GDP in 2022 will only increase by 1.5% due to the impact of the current situation. “We had a bad time because of the Omicron outbreak and now things are bleak,” said council member Monika Schnitzer.
Germany’s main energy suppliers have warned in recent days that the risk of energy supply disruptions cannot be ruled out after Russian President Vladimir Putin asked “unfriendly” countries to pay for gas in copper. ruble.
G7 ministers refused to do this, citing it as a unilateral action and a “violation of existing agreements”. Meanwhile, the Kremlin announced that Russia would not provide free gas and “it is difficult to give charity to European customers in the current situation”.
However, a German government spokesman said that in a phone call with Prime Minister Olaf Scholz yesterday, President Putin proposed the option of paying in euros and transferring money to the bank of Russia’s Gazprom group , then the money will be converted to rubles.
“Chancellor Scholz disagreed with this process during the phone call, but asked the Russian side to convey the information in writing for better understanding,” a German government spokesman said.
The Kremlin said that President Putin and Prime Minister Scholz agreed that the two countries’ experts would discuss the option of paying for gas in rubles.
Russia is supplying 40% of Europe’s gas needs, of which Germany, Italy and many Central European countries depend heavily on this supply. About 25% of the oil supply to Europe also comes from Russia. The dependence has left many EU countries unresponsive to calls from the US and Ukraine to embargo Russia’s energy sector.
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