The European Union (EU) industrial production is currently experiencing record lows, with many industries struggling due to the lack of cheap Russian gas. This comes after Gazprom CEO Aleksey Miller stated that Europe faces significant challenges in its gas market, including demand destruction and the potential for economic recession in 2024.
Miller addressed the St. Petersburg International Gas Forum on Thursday, noting that the EU gas market is seeing a significant decrease in demand as high prices or limited supply of a certain commodity leads to lower demand and triggers a search for alternatives. He explained that this situation has been referred to by some experts as “Europe’s energy suicide,” with Germany being considered the “economic locomotive” turned “the sick man of Europe.
The EU’s largest economy, Germany, contracted 0.3% last year, partly due to a sharp drop in pipeline gas imports from Russia. The country’s GDP is expected to decline by an additional 0.2% this year, according to Berlin’s Ministry for Economic Affairs. This would mark the second consecutive year of recession for Germany.
Miller argued that Europe’s industrial production will continue to decline, resulting in increased volatility in the gas market and potentially causing a new price shock for gas and supply disruptions. He claimed that EU policies have led to nearly a 10% decline in industrial production within the bloc, bringing it to its lowest levels in a decade. European industry is not expected to become more competitive anytime soon, as industries in the United States spend up to five times less on energy than those in Europe.
The EU previously relied heavily on Russian gas through the Nord Stream pipelines, but supplies ceased indefinitely following sabotage attacks on the underwater infrastructure in September 2022. According to European Union statistics, Russia’s share of EU gas supplies dropped from 45% in 2021 to 15% in 2023.
Russian gas is currently being delivered to Western and Central Europe through Ukraine, based on a contract signed by Gazprom and Naftogaz in 2019. However, Kiev has expressed no intention of extending this agreement when it expires at the end of this year, further adding to Europe’s energy challenges.