Germany raises alert, after Russia cuts gas supplies
Germany raises the alert level under an emergency plan after Russia cut...
Germany aims to assist its largest natural gas importer
Gas prices rises after Russia cuts German supply
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- Uniper, a gas distributor, will receive up to €15 billion ($15.3 billion) from the government.
- The company has been brought to its knees by months of Russian supply cuts and soaring spot market prices.
- German Chancellor Olaf Scholz said Uniper was “in great trouble”.
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The German government has stepped in to save one of the country’s largest energy companies, the latest victim of Europe’s natural gas crisis.
Uniper, a gas distributor, will receive up to €15 billion ($15.3 billion) from the government after being brought to its knees by months of Russian supply cuts and soaring spot market prices.
According to a press release issued by Uniper’s Finnish parent company Fortum on Friday, the company is Germany’s largest gas importer.
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The government has committed to providing €7.7 billion ($7.8 billion) to cover potential future losses under the rescue agreement, while state-run bank KfW will increase its current credit facility by €7 billion ($7.1 billion).
The government will also purchase a 30% stake in Uniper, while Fortum will reduce its stake from 80% to 56%.
“New geopolitical realities have shaken the European energy system to its core,” Fortum CEO Markus Rauramo stated in a press release.
According to Rauramo, more work is needed to make the gas industry sustainable.
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According to data from the Intercontinental Exchange, benchmark prices have risen 89 percent since the war began in late February.
German Chancellor Olaf Scholz announced the deal on Friday, saying Uniper was “in great trouble.”
“[Uniper is] of paramount importance for the economic development of our country, for the energy supply of the individual citizen, but also of many companies,” he added.
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Germany is especially vulnerable to a drop in Russian gas exports. The largest economy in the European Union has long relied on Russian gas to power its homes and heavy industry. More than half of Uniper’s long-term supply contracts are for Russian gas.
Because of a dispute over the return of a turbine from Canada to Russia, Russia’s state energy company, Gazprom, reduced gas shipments along the Nord Stream 1 pipeline, which connects Moscow’s gas directly to Germany, by 60% in June.
However, Germany has made strides in recent months to reduce its reliance on Russia, reducing Russia’s share of its gas imports to 35% from 55% prior to the start of the war.
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More budget cuts are on the way. The European Union has pledged to reduce its reliance on Russian gas by 66 percent by next year and completely by 2027.
On Wednesday, the EU unveiled its emergency gas rationing plan, which calls for member countries to cut their gas demand by 15% between August and March of next year.
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