Germany braces for sudden Russian gas shutdown with emergency package: sources
German officials are quietly preparing for any sudden stoppage of Russian gas supplies with a contingency plan that could include taking over critical companies, three people familiar with the matter told Reuters.
Preparations led by the Ministry of Economic Affairs show the heightened state of alert over the supply of gas that powers Europe’s biggest economy and is essential for the production of steel, plastics and cars.
Russian gas accounted for 55% of Germany’s imports last year and Berlin has come under pressure to cut a trade relationship that critics say helps fund Russia’s war in Ukraine.
Germany has said it wants to wean itself off Russian supplies, but expects to rely heavily on Moscow for gas until the middle of 2024.
It remains unclear if a crash will occur and officials have said Germany wants to avoid an escalation, for example by backing a European gas embargo, after previously backing sanctions against Moscow over coal and oil .
But they now fear Russia will unilaterally cut off gas flows and want to be able to cope if it does.
While a general framework is in place and the government is determined to help, details of how it will put the plan into action are being worked out, officials said.
The government would back the provision of additional loans and guarantees to prop up energy companies, help them cope with soaring prices, and could take critical businesses, such as refineries, under its wing, the three officials said. .
Asked about the measures, Germany’s economy ministry pointed to statements by its head, Vice-Chancellor Robert Habeck, that the country had made “intense efforts” in recent weeks to reduce its consumption of Russian energy.
Last month, Berlin approved a legal change to allow it to take control of energy companies as a last resort.
It is now discussing how it could use the measure in practice, such as taking control of the PCK refinery operated by Russia’s Rosneft in Schwedt near Poland, two of the people said. It accounts for most of Germany’s remaining Russian oil imports and could be hit by a European Union oil embargo.
Rosneft declined to comment on any German action.
NATIONALIZATION OF ENERGY?
One of the interviewees said nationalizing energy companies was an option being considered, but should be weighed carefully and justified on the grounds of securing energy supplies rather than punishing Russia.
Germany could also take stakes in other companies, said two people familiar with the matter. In 2018, it made a similar move when state development bank KfW bought 20% of energy grid operator 50Hertz to fend off a bid from State Grid in China.
The government’s latest emergency package has yet to be finalized. One of them warned that the acquisition of minority stakes in companies and the intervention at the Schwedt refinery were still under discussion but had not been decided.
Officials are also looking at how KfW can ease pressure on critical businesses by supporting them with new loans or emergency lines of credit they could use if energy prices spike and trigger calls for relief. expensive margin on their market positions.
Earlier this year, KfW helped German energy company Uniper, the gas division of EnBW VNG and coal-fired power plant operator Leag weather volatile energy markets.
KfW declined to comment on the companies it has helped.
Germany is also considering how it would ration gas in an emergency. Its regulator is considering prioritizing industry over households, which would be a reversal of current policy where businesses would be closed first.
The talks are taking place against a backdrop of war in Ukraine and an increasingly heated standoff between Moscow and Brussels, which has backed tough sanctions to isolate Russia.
Russian President Vladimir Putin told his armed forces in a parade on Monday that they were fighting for their country, but gave no clue how long their assault on Ukraine, which the Kremlin calls an operation, will last special military.
Russia’s Gazprom halted gas exports to Poland and Bulgaria last month after refusing to pay in roubles, but the Kremlin rejected European Commission accusations that Moscow was using natural gas supplies as blackmail.
The Kremlin and Gazprom have repeatedly said that Russia is a reliable energy supplier.
The Kremlin and Gazprom did not immediately respond to a request for comment on the reliability of supply.
After hesitantly backing coal and oil sanctions, Berlin now also wants to draw a line, four officials said.
They fear the gas cut will also send prices skyrocketing, allowing Moscow to profit from sales outside the EU and therefore still fail to empty its war chest.
Officials said Germany was reaching the limit of sanctions it could impose without triggering an economic spiral, with even those in the ruling coalition wholeheartedly backing penalizing Moscow, hesitant to impose gas sanctions.
Berlin has also been swayed by captains of German industry, including the chief executives of its largest listed companies and representatives of Russian-linked businesses, who have regularly met and lobbied officials to ‘they don’t ban gas,’ a person with knowledge of the matter said.
Company executives said in Berlin they were preparing to cut Russian energy ties anyway, but called on the government not to force them to do so immediately, said a second person familiar with the talks.