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Gazprom Reportedly Declares Force Majeure, Will Halt Gas Flows To Germany Indefinitely | ZeroHedge
Already days before the July 22 European "Doomsday" when the scheduled Russian 10-day maintenance of the crucial Nord Stream pipeline to Germany is slated to end - but which was thrown into deep doubt given Gazprom recently said it can no longer guarantee its "good functioning" due to crucial turbines being previously held up in Canada related to sanctions - the Russian energy giant has declared Force Majeure to one major European customer.
Simply put, Gazprom declared extraordinary and extreme circumstances to void itself from all contractual obligations to this customer, thus the gas will stop flowing indefinitely, as Reuters reports in a breaking development Monday, "Russian gas export monopoly Gazprom has declared force majeure on gas supplies to Europe to at least one major customer starting June 14, according to the letter seen by Reuters." The letter is reportedly dated July 14.
The letter invoked "extraordinary" circumstances outside the company's control, Reuters continues, citing a source saying the customer in question is Germany via the Nord Stream 1 pipeline.
As we've been detailing, German authorities have of late taken unprecedented steps in anticipation of an enduring Russian gas halt, essentially dimming the lights across the country - which has included everything from limiting hot water, to shutting down swimming pools, to quite literally dimming city street lights as it entered "alarm" stage over dwindling supply.
It seems this letter declaring its legal release from supply obligations going back to June 14 is in preparation for definitive action on July 22, namely that the pipeline's operations are likely to remain suspended.
In an analysis from earlier this month (available to pro subscribers), UBS economists laid out a detailed vision of what they see happening if Russia halts gas deliveries to Europe: It would reduce corporate earnings by more than 15%. The market selloff would exceed 20% in the Stoxx 600 and the euro would drop to 90 cents. The rush for safe assets would drive benchmark German bund yields to 0%, they wrote.
“We stress that these projections should be seen as rough approximations and by no means as a worse-case scenario,” wrote Arend Kapteyn, chief economist at UBS.
“We could easily conceive economic disruptions that lead to more negative growth outcomes.”
To be sure, markets are already pricing in some of the damage starting with the euro which starting this month traded at a fresh two-decade low and touched parity with the dollar, something it hasn't done since 2002.