Germany avoids the bankruptcy of the Gazprom subsidiary with a billionaire loan to ensure supply | Economy

A cyclist passes in front of the Gazprom Germania headquarters in Berlin.
A cyclist passes in front of the Gazprom Germania headquarters in Berlin.FABRIZIO BENSCH (REUTERS)

The German government has been forced to make a controversial decision to save Gazprom Germania, the German subsidiary of the Russian gas giant of the same name, from possible bankruptcy. The public bank KfW will issue a billion dollar loan to rescue the company, drowned by Russian sanctions. Gazprom Germania is in a very difficult situation after the Kremlin ordered the cut off of gas supplies to its European subsidiaries. This forced the German to buy in the pool (daily wholesale market) at much higher prices to continue serving its customers.

Gazprom Germania has been under government control since the beginning of April. In an unprecedented decision, the Ministry of Economy and Climate, headed by the green Robert Habeck, ordered the Federal Network Agency to assume its guardianship temporarily, until September. The goal, Habeck assured then, was to ensure the energy supply in the country. The loan is now defended with the same argument, for an amount not disclosed but that the Reuters agency estimates at around 9,000 or 10,000 million euros.

The company plays a decisive role in Germany because it is one of the main players in gas supply: it not only markets the energy; it also transports and operates storage facilities. One of its subsidiaries, Astora, manages the largest gas warehouse in the country, in the city of Rehdenin Lower Saxony, which is in turn one of the facilities with the largest capacity in all of Europe, with almost 4,000 million cubic meters.

With the loan, the Government assures in a statement, “insolvency and a cascading effect on the market are avoided.” The money will be used to ensure liquidity and to buy replacement gas, which does not come from Russia. The Executive of the Social Democrat Olaf Scholz affirms that the loan will be used solely to guarantee the commercial operations of the German subsidiary and the supply of gas to the clients with whom the energy is committed. “It is guaranteed not to flow into Russia,” the statement added.

Berlin’s decision includes extending the guardianship over the company beyond September. A new law passed last month allows the trusteeship to be extended almost indefinitely. In this way, permanent control of the company is ensured. The government appointed the Federal Network Agency as Gazprom’s trustee after the Russian group tried to sell the German subsidiary to two completely unknown Russian companies. The company also changes its name. It will be called Securing Energy for Europe GmbH (Ensuring energy in Europe), in English, to “send a clear signal to the market that the objective of the measures adopted is to guarantee the supply of energy in Germany and Europe,” says the Government.

40% reduction of the gas that arrives through the Baltic

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The energy tug-of-war that Moscow and Berlin have maintained since even before the Russian invasion of Ukraine began adds a new chapter this Tuesday with the announcement that Gazprom is going to reduce gas deliveries through the Nord Stream 1 pipeline by 40%. The state company assures that the cause is the delays in the repair work being carried out by the German company Siemens, although voices have already emerged that point to another Russian blackmail. “The security of supply is currently still guaranteed,” a spokeswoman for the Ministry of Economy and Climate said in a statement.

Since March, the Kremlin has been demanding payment in rubles for the gas it sells to “hostile countries”, including the European Union, which depends 40% on Russian gas imports. Moscow cut off the supply of its gas pipelines to Poland and Bulgaria due to the refusal of these countries to change the conditions of their contracts and to abide by the mandatory conversion of their payments into rubles. German companies are employing a system that balances the wishes of the Kremlin with the need not to circumvent sanctions imposed by the European Union. The solution has been to pay in euros into a specially created account at Gazprombank (Russian state-owned entity not sanctioned by the EU) and have the bank itself do the conversion to rubles.

Gazprom claims that it can only pump 100 million cubic meters of gas through the Baltic Sea pipeline due to alleged technical problems, which means that only 60% of the planned daily volume will arrive, which is around 167 million cubic meters. Germany is in the process of filling its tanks with the aim of reaching maximum capacity in the fall.

Both Berlin and Brussels suspect that Gazprom kept storage levels artificially low last winter to fuel the gas supply crisis and raise prices. The Rehden warehouse, in particular, managed by Gazprom Germania, remained practically empty. The authorities are taking advantage of the summer and the fall in demand to fill the warehouses, which are currently already at 55%, according to data from this Tuesday from the Federal Network Agency.

After agreeing in April on the Russian coal embargo and decreeing a partial ban on the import of Moscow’s oil two weeks ago, all eyes are already pointing to what is emerging as the next step in the escalation of EU energy sanctions: Russian gas. Several member states, especially the Baltics, are already asking for its inclusion in a seventh sanctions package. Germany, which has managed to reduce its dependence from 55% to 35%, maintains that it still cannot do without this hydrocarbon that feeds its powerful industry. According to his calculations, he could not disengage himself from Russian dependency until next year. Meanwhile, it accelerates the construction of regasification plants to receive liquefied natural gas by ship.

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