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ENERGY

What does the shut-off of Russian gas supplies mean for Italy?

After Russian energy giant Gazprom suspended gas deliveries to Italy on Saturday, many are wondering what consequences the stoppage will have on the country’s energy supplies.

Gazprom logo.
Russian energy giant Gazprom suspended gas deliveries to Italy last Saturday, blaming the stoppage on Austrian gas grid operators. Photo by Kirill KUDRYAVTSEV / AFP

What’s going on?

Over the past three days, Italy has received none of the gas supplies it expected from Russian energy giant Gazprom. 

The impasse officially started last Saturday, when Gazprom announced it would not be able to deliver gas to Italy due to “the impossibility of gas transport through Austria” – Russian gas supplies are delivered to Italy through the Trans Austria Gas pipeline (TAG), which reaches into Italian territory near Tarvisio, Friuli Venezia-Giulia. 

READ ALSO: Russia suspends gas to Italy after ‘problem’ in Austria

Though Gazprom originally attributed the problem to Austrian gas grid operators refusing to confirm “transport nominations”, Austria’s energy regulator E-Control said that the Russian energy mammoth had failed to comply with new contractual agreements whose introduction had been “known to all market actors for months”. 

Additional information about the incident only emerged on Monday, when Claudio Descalzi, the CEO of Italy’s national energy provider ENI, said that supplies had been suspended after Gazprom failed to pay a 20-million-euro guarantee to Austrian gas carrier Gas Connect. 

Descalzi also added that ENI was ready to step in and deposit the guarantee itself in order to unblock deliveries to Italy.

Logo of Italian energy regulator ENI.

Italian energy regulator ENI said it was ready to pay Austrian gas carriers a 20-million-euro guarantee to unblock deliveries. Photo by Marco BERTORELLO / AFP

READ ALSO: Italy’s ENI ready to pay guarantee to unblock Russian gas

At the time of writing, however, no agreement between ENI, Gas Connect and Gazprom has yet been reached, with the stoppage expected to continue until Wednesday at the very least.

What would an indefinite stoppage mean for Italy’s upcoming winter season?

Though energy giant ENI appears to be confident that a compromise between all the involved parties will be reached shortly, the “indefinite shutdown” of the Nord Stream 1 pipeline in early September is somewhat of a menacing precedent. 

After fears of a long-term supply suspension cropped up over the weekend, outgoing Ecological Transition Minister Roberto Cingolani publicly reassured Italians that “barring any catastrophic events, Italy will have the whole of winter covered”.

It isn’t yet clear what exactly Cingolani meant by “catastrophic”, but the latest available data seem to suggest that Italy wouldn’t have to resort to emergency measures, chiefly gas rationing, should Gazprom halt deliveries indefinitely. 

Italian Minister for Ecological Transition Roberto Cingolani.

Outgoing Minister for Ecological Transition Roberto Cingolani said that, “barring any catastrophic events”, Italy will have enough gas supplies for the winter. Photo by Andreas SOLARO / AFP

In 2021, prior to Russia’s invasion of Ukraine, Italy received around 20 billion cubic metres of Russian gas per year, which accounted for about 40 percent of the country’s annual gas imports. 

But, thanks to the supply diversification strategy carried out by outgoing PM Mario Draghi and his cabinet over the past few months, Russian gas currently accounts for, in the words of ENI’s CEO Claudio Descalzi, only “about nine to 10 percent” of Italian gas imports.

READ ALSO: Italy’s Draghi criticises Germany over latest energy plan

Granted, Italy still receives (or, given the current diplomatic deadlock, expects to receive) a non-negligible total of 20 million cubic metres of Russian gas per day. But, should supply lines between Rome and Moscow be shut off until further notice, Italy could fall back on existing gas stocks to meet winter consumption demands. 

Last Wednesday, Cingolani announced that the country had already filled up 90 percent of its national gas stocks – Italy has nine storage plants for an overall storage capacity of 17 billion cubic metres of gas – and the government was now working to bring that number up by an additional two or three percentage points.

These supplies, Cingolani said, are set to give Italy “greater flexibility” with respect to potential “spikes in winter consumption”.

Gas storage station in Loenhout, Belgium.

Italy has nine storage plants for an overall storage capacity of 17 billion cubic metres of gas. Photo by Kenzo TRIBOUILLARD / AFP

Finally, Italy is expected to receive an additional four billion cubic metres of gas from North Europe over the winter months – deliveries which will be complemented by the first shipments of LNG (Liquefied Natural Gas) from Egypt.

Both of these developments are expected to further reinforce Italy’s position in the energy market for the cold season.

What about the long-term consequences of an indefinite stoppage?

An indefinite shut-off of Russian gas supplies would effectively anticipate Italy’s independence from Moscow by nearly two years – Draghi’s plan has always been to wean the country off Russian gas by autumn 2024.

However, the Italian government’s strategy is (or, perhaps, was, as a new government is about to be formed) centred around a gradual phasing out of Russian supplies. As such, although not immediately problematic, a ‘cold-turkey’ scenario might create supply issues for Italy at some point during 2023.

READ ALSO: EXPLAINED: How much are energy prices rising in Italy this autumn?

Granted, Algeria, whose supplies currently make up 36 percent of Italy’s national demand, is expected to ramp up gas exports and provide Rome with nine billion cubic metres of gas in 2023.

But, even when combined with LNG supplies from several African partners – these should add up to a total of four billion cubic metres of gas in 2023 – there’s a risk that Algerian gas might not be able to replace Russian gas on its own.

An employee works at the Tunisian Sergaz company, that controls the Tunisian segment of the Trans-Mediterranean (Transmed) pipeline, through which natural gas flows from Algeria to Italy.

Algerian gas supplies, which reach Italy through the Trans-Med pipeline (pictured above), might not be enough to replace Russian gas in 2023. Photo by Fethi BELAID / AFP

Therefore, should an indefinite shut-off be the ultimate outcome of the current diplomatic incident between ENI, Austria’s Gas Connect and Russia’s Gazprom, Italy, this time in the person of new PM Giorgia Meloni, might have to close deals with other suppliers or ask existing suppliers to ramp up production. 

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ENERGY

Lights out: How Christmas in Italy will be different this year

As the European energy crisis continues, some cities in Italy have chosen to save on electricity by downsizing regular Christmas displays, thus making this year’s festivities a little less flashy.

Lights out: How Christmas in Italy will be different this year

With less than a month to go until the Christmas holidays, many might be rejoicing at the prospect of finally seeing their cities lit up by dazzling Christmas displays.

But, as the European energy crisis shows no sign of abating and many cities across the boot keep struggling to square their accounts in the face of soaring bills, some residents may be disappointed to know that this year’s festive decorations might differ from the norm.

Milan, Italy’s economic capital, was one of the very first Italian cities to announce it would significantly reduce Christmas displays to save on energy.

READ ALSO: Lights off and home working: Milan’s new energy-saving plan for winter 

After reports emerged in early October that the city would end up spending a whopping €130 million on energy bills alone in 2022, Milan’s mayor, Giuseppe Sala, was quick to warn residents that Christmas decorations would be “restrained” and operate “for shorter periods of time”.

And, it wasn’t long before Sala made good on his promises. 

Earlier this month, the city’s authorities agreed on putting up decorations and light displays on December 7th (that is over two weeks after the usual date) and taking them down on January 6th instead of late January. 

Christmas lights in the streets of central Milan

Christmas lights in Milan will be switched on on December 7th, that is over two weeks after the usual switch-on date. Photo by Miguel MEDINA / AFP

Also, while in previous years Milan’s city centre was illuminated overnight, this year’s Christmas lights will be switched on at 4pm and switched off at midnight. 

But, while Milan residents might be slightly dissatisfied with the new arrangements, they sure have little to complain about when compared to Rome residents. 

It’ll be a dark Christmas (literally and, perhaps, even figuratively) for most areas of the Eternal City and not merely because of the current energy crisis. 

READ ALSO: Energy crisis: The Italians reviving ‘nonna’s’ traditions to keep costs down

The city’s tender for this year’s Christmas lights contract received no bids before its deadline on October 27th, which means that, in many neighbourhoods, festive decorations will be largely left to the goodwill and financial means of the residents.

So while the popular Piazza di Spagna, Porta Pia and Via Alessandria will light up over the holiday season thanks to private funding, the San Giovanni and Tuscolano neighbourhoods and Via Cola di Rienzo are currently expected to remain au naturel.

Christmas light in a street in Rome

Many areas of the capital, Rome, will be without lights this year due to lack of funding. Photo by Tiziana FABI / AFP

Things will generally be better in Venice and Florence, where local authorities have recently chosen to maintain their usual arrangements, the only exception being the replacement of regular lights with energy-efficient, LED ones. 

So, while the lighting might be a little softer and displays might not be as remarkable as in previous years, both cities should be able to deal with late-December energy bills more comfortably than they would have had to do otherwise.

READ ALSO: EXPLAINED: How Italy has avoided a huge hike in gas prices – for now 

Having said that, not all Italian cities have decided to resize their Christmas offerings on the back of eye-watering electricity prices. 

Naples, which has long been known for the extravagance of its Christmas and New Year celebrations, has seemingly chosen to turn a blind eye to the energy crisis and will allocate as much as €1.5 million (that’s €150,000 to each one of the ten local municipalities) to this year’s displays.

Unsurprisingly, the comune’s decision has been drawing widespread criticism, with many local political figures pointing out that part, if not most, of the above-mentioned amount should have been spent elsewhere, perhaps in the form of a one-off ‘Christmas bonus’ for struggling households and businesses.

The available money should have been used to “turn off the crisis and light up people’s hearts”, city councillors Antonio Culiers and Francesco Flores said in a joint statement earlier this month.

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