European gas prices surged by 35% after Russia shut down a key supply pipeline raising the prospects of blackouts, rationing and recession this winter. 

The Kremlin says Western sanctions on its energy sector is the sole reason behind gas supply problems, that have brought the vital Nord Stream 1 pipeline supplies to zero for an indefinite period. 

Kremlin spokesman Dmitry Peskov told reporters on a conference call that "problems with gas supply arose because of the sanctions imposed on our country by Western states, including Germany and Britain,"

“Sanctions that prevent the units from being serviced, that prevent them from being moved without appropriate legal guarantees … it is these sanctions imposed by Western states that have brought the situation to what we see now,” Peskov said.

"We see incessant attempts to shift responsibility and blame onto us. We categorically reject this and insist that the collective West – in this case, the EU, Canada, the UK - is to blame for the fact that the situation has reached the point where it is now."

Asked if Nord Stream 1 would resume pumping if sanctions were eased, Peskov said: "Definitely".

Russia’s Gazprom says the Portovaya compressor station, which pushes gas towards Germany through the Nord Steam 1 pipeline no longer complied with Russian safety requirements.

"It is obvious that Europe is getting worse for people, entrepreneurs, companies, to live and work: less money is being earned, the standard of living is falling," Peskov said.

"And of course, ordinary citizens will have more and more questions about the leadership of their countries." Sanctions on Russian supplies have pushed up European gas prices by nearly 400% over the past year.

The Kremlin also says sanctions are disrupting the ability of Siemens Energy, which supplies and services equipment for the pipeline, to help repair the engine oil leak.

“Other reasons that would cause problems with the pumping don’t exist,” Peskov was cited by the Interfax news agency as saying.

Russian flows of gas via the Nord Stream 1 pipeline, which runs under the Baltic Sea to Germany are now zero. Before the Ukraine conflict, the pipeline supplied about a third of the gas exported by Russia to Europe but was running at only 20% of capacity before the halting to zero because of sanctions and technical problems.

The Kremlin announcement intensified the energy crisis, which has dealt a heavy blow to Western Europe’s economy

On Friday, Gazprom had said it detected an oil leak, during three days of maintenance work, in the only turbine that was still working at Portovaya, and would shut off natural gas supply until the hazardous issue was fixed. 

Since the conflict in Ukraine, the United States, and its allies have embarked on an economic war against Russia with the most severe sanctions. Moscow has warned that they will face an energy crisis as a result of the sanctions backfiring. 

French President Emmanuel Macron has warned that in order to avoid the risk of energy rationing and cuts this winter there must be a ten percent reduction in the country’s energy use over the coming weeks and months.

“The best energy is that which we do not consume,” the French leader said at a news conference, where he urged French businesses and households to save energy, including by turning down the heating and air conditioning.

France is among the many European countries that have cut back as energy costs rise uncontrollably. The European Commission president, Ursula von der Leyen, says the European Union’s electricity market “is no longer operating” as a result of the conflict in Ukraine. The EU’s energy ministers are set to hold an emergency meeting on Friday in Brussels to discuss the bloc’s out-of-control energy crisis. 

Macron did not offer an explanation as to how the 10 percent energy saving incentive would be policed or measured. Many French households are already curbing their use of gas and electricity because of rising prices, but it appears impossible that everyone will follow Macron’s call. 

France’s prime minister has raised the possibility of homes facing blackouts for two-hours in the winter if solutions are not found. German importers are discussing possible rationing in the European Union's biggest economy.

Power spot prices (the half-hour price of wholesale market electricity) across Western Europe have climbed to unparalleled levels. European benchmark gas futures closed 15% higher, after earlier jumping as much as 35%. Power also gave up some of its gains. Nevertheless, the volatile gas market shows no sign of erasing the gains it made since last year and there is now the risk of even higher prices during the winter months.

On Tuesday, Russia's foreign ministry said that the United States had fomented Europe's gas supply crisis by pushing European leaders towards the "suicidal" step of cutting economic and energy cooperation with Moscow.

When asked what needed to happen for Nord Stream 1 to begin pumping again, Foreign Ministry spokeswoman Maria Zakharova told reporters "you are asking me questions that even children know the answer to: those who started this need to finish this."

She accused the United States of having long sought to break the energy ties between Russia and major European powers such as Germany, even though Moscow had been a reliable energy supplier since Soviet times.

"The dominance of Washington prevailed," Zakharova told Reuters on the sidelines of Eastern Economic Forum in Vladivostok. "Political forces were brought to power in the European Union who are playing the role of 'sheep-provocateurs'."

"It is absolute suicide but it seems they will have to go through this," she said.

The conflict in Ukraine began after Moscow warned against the eastward expansion of the U.S.-led NATO military alliance toward Russian borders. The Kremlin asked for security guarantees from the U.S. but failed to respond to Russia’s security concerns.

On 24 February 2022, Russia launched what it called a special military operation in Ukraine. Soon after the West imposed unprecedented sanctions, which targeted Russian energy. Critics accuse American energy of financially benefiting from the violence and have called on the West to offer a tangible peace solution saying the sanctions policy has failed to end the conflict. 

Many European power distributors have already collapsed as a result of supply problems and some major generators could be at risk, hit by caps that limit the price rises they can pass to consumers or caught out by hedging bets, with gas prices now 400% more than a year ago.

Nord Stream 1, which runs under the Baltic Sea to Germany, historically supplied about a third of the gas Russia exported to Europe, although it was already running at around 20% of capacity since June because of Western sanctions. 

Rating agency Fitch said there were still many uncertainties surrounding EU winter gas supply and demand, such as the temperature, supplies of LNG, and the evolution of the conflict in Ukraine.

With the euro dropping to a record 20-year low, the eurozone is now almost certainly believed to be entering a recession as surveys show a rising cost of living crisis and a gloomy outlook that is keeping consumers away from spending.
The United Kingdom is worse off than the Eurozone.