Italy Pulls Ahead in Europe’s Rush to Cut Russia-Gas Ties

Next week, Prime Minister Mario Draghi is heading to Algeria -- now Italy’s top gas supplier -- for the second time this year to discuss bolstering ties between the two countries.

Russia’s Gazprom PJSC earlier this year halted shipments to some EU countries over a payment dispute. In Germany, the government is now concerned that flows won’t fully resume when the Nord Stream pipeline -- Russia’s biggest gas link to the continent -- returns from scheduled maintenance next week.

“Italy can survive better than Germany, which relies only on Russian imports,” said Annalisa Perteghella, senior policy adviser for energy and climate at think tank Ecco. “Russia will probably continue with a ‘stop and go’ strategy to raise gas prices, and bank on it.”

Officials in Italy are now working to make sure that the country will be able to survive next winter without rationing gas to families and businesses, even if Russia fully halts supplies.

The government made a strategic decision at the start of the war to quickly seek alternative supplies, Prime Minister Mario Draghi told reporters late on Tuesday.

“Italy cannot ever find itself in a situation of geopolitical dependency,” he said. “This is not acceptable. We acted quickly.”

European Crisis

The current energy crisis is Europe’s worst in decades. The continent was already dealing with low gas inventories before the war in Ukraine, and a heatwave is now swamping parts of the region, straining electric grids and putting energy security plans at risk.

The EU aims to have gas storage sites at least 80% full by the beginning of November, and it’s urging citizens to save energy now to avoid industry having to reduce power usage during the winter. Italy’s storage sites are currently about 60% full.

Some countries, including Germany and Italy, are also considering bringing coal plants back online to help mitigate the supply crunch, despite the region’s long-term climate goals.

In order to gradually diversify supplies away from Russia, the Italian government, along with state-controlled company Eni SpA, has arranged deals with African and North African countries to increase gas imports.

Italy’s gas network company, Snam SpA, also bought two floating storage regasification units to add liquefied natural gas capacity in the next two years, though one unit has faced popular opposition in the industrial city of Piombino.

Gas flows from Algeria are more than double those coming from Russia, according to Snam data on Tuesday.

Rationing Risk

“Italy is well-positioned because of its diversification of supplies,” Perteghella said. “But if storages cannot be filled on time, rationing will be needed and voluntary changes in behavior should start as soon as possible.”

Gazprom’s shipments to Italy have been curbed since mid-June, and Eni said earlier this week 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 were to fully halt flows.

The government in Rome has already allocated around 33 billion euros ($33 billion) to shield families and businesses from higher energy bills, and it’s working on a separate aid package worth as much as 8 billion euros, according to people familiar with the matter.

With several factors in next winter’s energy scenario still in flux, officials are working on a contingency plan, which could include rationing energy, though this is unlikely to be implemented, the people said.

A key factor at play will be temperatures during the winter.

“If in the middle of the winter Russia suddenly cuts supplies to Italy, rationing won’t be avoidable,” said Simona Benedettini, an independent energy adviser based in Rome.

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Read more articles by Chiara Albanese, Alberto Brambilla, Giovanni Salzano