Italy is leading the way in weaning off Russian natural gas

Almost five months after Russia’s invasion of Ukraine triggered a global energy crisis, Italy is moving to reduce its dependence on Russian energy, Bloomberg reports.

Italy has reduced its dependence on Russian gas imports to 25%, from around 40% at the beginning of the year. By contrast, Germany – Europe’s largest economy – still imports about 35% of its natural gas needs from Russia.

Across the European Union, governments are rushing to fill natural gas storage facilities and are considering alternative energy sources, even at possible environmental costs. Russia has already cut shipments to Italy, and officials in Rome are preparing for further cuts.

Next week, Italian Prime Minister Mario Draghi will travel to Algeria – now Italy’s main gas supplier – for the second time this year to discuss strengthening bilateral ties.

Russia’s Gazprom stopped deliveries to some EU countries earlier this year due to a payment dispute. In Germany, the government is concerned that flows will not fully resume when maintenance work on Nord Stream 1, the longest natural gas pipeline between Russia and the continent, is finished.

“Italy can survive better than Germany, which relies only on Russian imports,” said Annalisa Perteghella, senior energy and climate policy adviser at think tank Ecco. “Russia will likely continue its strategic moves to raise gas prices and build on that.”

Officials in Italy are now working to ensure the country will be able to survive next winter without gas rationing for households and businesses, even if Russia cuts off supplies completely.

A government spokesman in Rome declined to comment.

European crisis

The current energy crisis is Europe’s worst in decades. The continent was already struggling with low natural gas reserves before the war in Ukraine, and now a heatwave is ravaging parts of the region, straining power grids and jeopardizing energy security plans.

The EU aims to have gas storage at least 80% full by early November and is urging citizens to save energy now to avoid industry being forced to cut energy use over the winter. Italy’s storage facilities are currently about 60% full.

Some countries, including Germany and Italy, are also considering restarting coal plants to help ease the supply crisis, despite the region’s long-term climate goals.

In order to gradually become independent from Russia, the Italian government, together with the state-controlled company Eni SpA, has entered into agreements with African countries to increase natural gas imports.

Gas flows from Algeria are more than double those from Russia, according to today’s data from Italy’s natural gas network company Snam SpA.

Risk of slips

“Italy is in a good position because of the diversification of its supply,” Perteghella said. “But if the reservoirs are not filled in time, there will need to be energy bills and voluntary behavior changes will need to start as soon as possible.”

Gazprom’s shipments to Italy have been curtailed since mid-June, and Eni said earlier this week that the Russian company plans to further cut supplies by about a third. Bank of Italy governor Ignazio Visco has warned of a recession if Moscow completely halts the flows.

The government in Rome has already set aside about 33 billion euros to protect households and businesses from high energy bills, while it is working on a separate aid package of up to 8 billion euros, according to people with knowledge of the matter.

With several factors of next winter’s energy scenario still fluid, officials are working on a contingency plan that could include the energy vouchers, though that is unlikely to be implemented, the sources said.

A key factor that will play a role will be the temperatures during the winter.

“IF in the middle of winter Russia suddenly cuts off supplies to Italy, the bills will not be avoidable,” said Simona Benedettini, an independent energy consultant based in Rome.