Western sanctions on Moscow have further disrupted gas supplies on a key pipeline from Russia to Germany in another blow to Europe’s efforts to secure fuel for winter with living costs already skyrocketing, led by energy prices.

Russian Energy giant Gazprom says the Nord Stream 1 pipeline will not be restarting supplies on Saturday after an oil leak was found during maintenance work. 

The vital natural gas supplies from Russia will not be resuming after the main gas turbine at a compressor station near St Petersburg was found to have an engine oil leak during inspections. 

“Gas transmission via the Nord Stream pipeline has been fully shut down until the operational defects in the equipment are eliminated,” Gazprom said in a statement posted on social media. 

The energy giant said the turbine on Nord Stream 1 could not operate safely until the leak was repaired, and gave no timeframe for the resumption of gas supplies via the pipeline, which had been due to return to operation on Saturday after a three-day maintenance break.

This week, the Kremlin said only sanctions are preventing Nord Stream 1 from working at full capacity. Since the summer, the pipeline has been operating at a reduced level after several gas turbines were forced to shut down. Some of the turbines were sent to Canada for repairs and were stuck there because of the Canadian government’s sanctions on Russia over the conflict in Ukraine.

Kremlin spokesman Dmitry Peskov had said earlier on Friday that there could be more disruptions to deliveries via Nord Stream 1. "It's not the fault of Gazprom that the resources are missing. Therefore, the reliability of the entire system is at risk," he said when asked if more outages could be expected.

Gazprom has said European Union sanctions have resulted in technical problems preventing it being able to provide the full volume of contracted gas through the pipeline. It says necessary repairs could only be done in "the conditions of a specialized workshop". It has also posted a picture showing leaked oil on equipment at the compressor station.

Sanctions on Russian gas means flows to Europe have already fallen in the first seven months of this year, with flows through the three main pipeline routes down around 40% compared with the same period last year.

Russia has strongly rejected European allegations that the maintenance work is a pretext to use gas as a political weapon. Moscow says Western sanctions over the conflict in Ukraine are hindering the equipment repairs. 

In another development showing how sanctions on Nord Steam 1 are disrupting gas supplies to Europe; Gazprom said on Saturday it would ship 42.7 million cubic meters (mcm) of natural gas to Europe through Ukraine on Saturday. 

Flows via the Sudzha entry point were up slightly compared to what Gazprom shipped on Friday. While it’s not enough to compensate for the missing gas that was expected to be pumped through Nord Stream 1 on Saturday, it does nevertheless highlight Moscow is willing to pump gas to Europe contrary to allegations by Brussels. 

Nord Stream 1 runs under the Baltic Sea to supply Germany and others with gas, but Berlin is the most dependent. The president of the German network regulator had previously warned that Germany would be able to cope with the three-day outage as long as flows resumed on Saturday.

The maintenance has raised the prospects of recession and energy rationing in some of western Europe’s richest countries.

Restrictions to European gas supplies are deepening an energy crunch that has already triggered a 400% surge in wholesale gas prices since last August, squeezing consumers and businesses and forcing governments to spend billions to ease the burden. 

In Germany, inflation soared to its highest in almost 50 years in August and consumer sentiment soured as households brace for a spike in energy bills.

"Fear of significantly higher energy costs in coming months is forcing many households to take precautions and put money aside for future energy bills," said consumer expert Rolf Buerkl, who added that doing so was further hitting consumer confidence as there was less money for other purchases.

There have been warnings that the situation could become even worse in coming weeks and months if there is not sufficient fuel, especially gas, to heat homes, pushing bills even higher.

Also, Germany is Russia's single biggest gas buyer, cut use of the fuel by 15% during January-June. While it is exploring other sources of supplies, it remains dependent on Russia.

The German network regulator says tight supply means there will be problems keeping consumers warm and industry functioning. The country has been racing to fill its storage tanks before winter. That storage is now nearly 85% full, but Berlin says reaching a 95% target by November 1 will be tough unless companies and households use less fuel.

Russia typically supplies about 40% of Europe's natural gas, mostly by pipeline. Deliveries last year were around 155 billion cubic meters (bcm).

Europe has historically relied on Russia for around 40% of its natural gas, most delivered through pipelines including Nord Stream 1, which runs directly to Germany. Deliveries last year were around 155 billion cubic meters (bcm). Via Ukraine, the gas goes mainly to Austria, Italy, Slovakia, and other east European states. 

A network of interconnecting pipelines links Europe’s internal gas markets.
Not all countries get gas directly from Russia, but if countries such as Germany, Europe's top buyer of Russian gas, receive less, they must fill the gap from elsewhere, for instance from Norway, which has a knock-on effect on available gas for other countries.

As a result, changes in Russian supplies to Europe because of European sanctions on Moscow can cause as much gas price volatility in Britain as in the rest of Europe, even though Britain typically gets less than 4% of its gas from Russia. Lower Russian supply means less could be available from its largest supplier Norway.

Meanwhile, Russian oil production may increase this year, Deputy Prime Minister Alexander Novak says, despite Western sanctions over Ukraine. 

He said production of oil and gas condensate is expected at between 520 million tons and 525 million tons in 2022 after it reached 524 million tonnes in 2021. Russian oil production has proved resilient and has defied predictions of a steep decline following sweeping restrictions introduced by the West. 

The Kremlin has also warned that Russia would stop selling oil to countries that impose price caps on Russia's energy resources - caps that Moscow said would lead to significant destabilization of the global oil market. This comes as the Group of Seven (G7) finance ministers agreed to impose a price cap on Russian oil. 

"Companies that impose a price cap will not be among the recipients of Russian oil," Kremlin spokesman Dmitry Peskov told reporters. 

Critics of the Western sanctions regime on Russia say the policy has failed to end the Ukraine conflict and is backfiring on the West itself in particular European households, who are witnessing a cost of living crisis, especially in the energy sector. This is while civilians are suffering from the fighting in Eastern Europe in the absence of a peace plan.