EU still faces gas halt risk despite Nord Stream restart, Fitch says

Energy Trade

The resumption of Russian gas flows through the Nord Stream 1 pipeline after a 10-day annual maintenance period does not eliminate risks of a future gas supply cessation, Fitch Ratings says.

Furthermore, the current low levels of supply at 40% of capacity are keeping gas prices high and maintaining pressure on the profitability and cash flows of European corporates which may increase further as the heating season approaches. Gas supplies to Europe through Nord Stream 1 restarted on July 21, calming immediate fears that Russia would not resume supplies. However, Gazprom has reportedly warned its European customers of 'force majeure' circumstances that prevent it from guaranteeing future supplies.

This, along with previous public warnings that Russian supplies may be reduced further, exposes European companies to the risks of further supply disruptions or a halt to supply.

Fitch said, that the countries most dependent on Russian gas would accelerate energy savings measures, which could reduce production in some industries. The European Commission has already asked all EU members to cut their gas use by 15% from August 1 until March to prepare for further disruptions in Russian gas deliveries.

According to Fitch, corporates in the heavy manufacturing sector will face increased supply chain risks in the event of an abrupt halt of Russian gas as some of their main suppliers are heavy gas users. However, the company believes that many rated companies in the sector have business models or mitigation plans that could offset any potential rating pressure arising in this scenario.

More broadly, most European corporate sectors will be affected by slow economic growth, or even a recession, in the event of Russian gas supply cessation, particularly in Germany and some Central and Eastern European countries.


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