European gas prices rocketed as much as 30 per cent higher on Monday after Russia said one of its main gas supply pipelines to Europe would stay shut indefinitely, stoking renewed fears about shortages and gas rationing in the European Union this winter.

The benchmark gas price surged as high as 272 euros per megawatt hour (MWh) when the market opened after Russia said on Friday that a leak in Nord Stream 1 pipeline equipment meant it would stay shut beyond last week’s three-day maintenance halt.

The Dutch TTF October gas contract had eased to 256 euros, up 23 per cent on the day by 0723 GMT but almost 400 per cent higher than a year ago. This year’s price surge has squeezed already struggling consumers and forced some industries to halt production.

Europe has accused Russia of weaponising energy supplies in retaliation for Western sanctions imposed on Moscow over its invasion of Ukraine. Russia says the West has launched an economic war and sanctions have hampered pipeline operations.

The Nord Stream pipeline, which runs under the Baltic Sea to Germany, historically supplied about a third of the gas Russia exported to Europe but it was already running at just 20 per cent of capacity before flows were halted last week for maintenance.

Russian gas being supplied via Ukraine, another major route, has also been reduced, leaving the EU racing to find alternative supplies to refill gas storage facilities for winter. Several states have triggered emergency plans that could lead to energy rationing and raising prospects for a recession.

Lehman moment

Finland and Sweden on Sunday announced plans to offer billions of dollars in liquidity guarantees to power companies in their countries after Russia’s Gazprom shut the Nord Stream 1 gas pipeline, deepening Europe’s energy crisis. Finland is aiming to offer 10 billion euros ($9.95 billion) and Sweden plans to offer 250 billion Swedish crowns ($23.2 billion) in liquidity guarantees.

“This has had the ingredients for a kind of a Lehman Brothers of energy industry,” Finnish economic affairs minister Mika Lintila said on Sunday. When Lehman Brothers, the fourth-largest US investment bank at the time, filed for bankruptcy in September 2008 with more than $600 billion in debt, it triggered the worst parts of the US financial crisis. “The government’s programme is a last-resort financing option for companies that would otherwise be threatened with insolvency,” Finland’s Prime Minister Sanna Marin told a news conference.