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(Bloomberg) — Germany may have to terminate or even shut down industrial capacity if a gas transit agreement between Ukraine and Russia is not extended past its expiration at the end of next year, according to Economy Minister Robert Habeck.
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Habeck, who is also vice chancellor, issued a stark warning on Monday at an economic conference in eastern Germany, saying policymakers should avoid “making the same mistake again” assuming the economy would not suffer without precautions to secure energy supplies.
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He added that rules on sharing the burden of potential gas shortages in Eastern Europe would have to be respected, meaning Germany would have to export gas there to make up the shortfall and that manufacturers in Europe’s largest economy might have their supplies restricted or reduced.
“There is no safe scenario for how things will play out,” Habeck said at the Bad Saro forum. He said the additional capacity — including a planned LNG terminal on Germany’s northern coast that has drawn opposition from local residents and environmental groups — would be necessary to maintain supply to both East Germany and Eastern Europe.
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Despite the massive invasion of the country by Kremlin forces in February last year, Ukraine still gets tolls by allowing Russian gas to flow through its territory to countries like Austria, Slovakia, Italy and Hungary.
Even if some supply continues beyond 2024, the current transit agreement is unlikely to be extended under similar circumstances, given the lack of political support, according to a report from the Center for Global Energy Policy published last week.
“Direct negotiations between Ukraine and Russia on the extension of the carriage contract seem highly implausible in the current environment,” according to the report’s authors, Anne-Sophie Korbo and Tatyana Mitrova.