Germany has hatched a plan to rescue its biggest Russian gas importer from bankruptcy amid huge increases in energy prices, the government has confirmed.
Chancellor Olaf Scholz said the government would take a 30% stake in energy company Uniper and also promised more help would be offered to ordinary citizens struggling to cover soaring energy bills, adopting a slogan of crisis addressed to the public: “You will never walk alone.”
Scholz admitted the depth of the crisis Germany found itself in as it struggled to deal with a drastic cut in Russian gas supplies while trying to quickly diversify its energy supply and reduce its dependence on Moscow. Since the start of the invasion of Ukraine, it has reduced its dependence on Russian gas from 55% to 26%, according to the Ministry of Economy.
Interrupting his vacation for a hastily called press conference in Berlin, Scholz said his government would make 7.7bn euros (£6.5bn) available to Uniper in the form of hybrid capital, as well as a credit line of 9 billion euros to the company via the State. run the KfW bank.
Economy Minister Robert Habeck characterized the move, which government and industry insiders have alluded to for weeks, as an attempt to avoid a “Lehman Brothers-style crisis”. It came a day after Russia restarted the main gas pipeline between it and Germany after scheduled maintenance work, but only released 40% of capacity throughput.
The business community, led by German industry association BDI, reiterated Habeck’s warning on Thursday that gas flow was insufficient and too unpredictable for Germany and could still be cut off completely. Habeck stressed the urgency of developing contingency plans to save gas ahead of winter, announcing a national emergency energy-saving strategy.
Friedrich Merz, leader of the conservative opposition CDU/CSU alliance, accused the government of acting much too late, saying a comprehensive savings program should have coincided with the start of the Russian invasion of Ukraine five months ago.
The head of the Federal Network Agency, Klaus Müller, announced that the targets for filling Germany’s 23 gas storage facilities will be increased in response to the lack of supply, which he admitted would not be not enough to get Europe’s largest economy through the winter. They are around 65%, having not increased for several days. The goal, which Müller admitted is not achievable, is to reach a 95% fill level by November 1.
Siegfried Russwurm, the BDI chairman, said there was little cause for relief that the gas had restarted, although the scenario was better than many had expected. There were widespread fears that Russia might have chosen not to open the taps at all.
“It remains to be seen whether the gas will actually flow in the long term and in the contractually agreed quantities,” he said. “The limited quantities delivered will lead to high prices and uncertainty among industry customers as well as private consumers.” He added that Germany risked “becoming a pawn in Russia’s policy of extortion”.
Many political and industry observers believe he has been in this atrocious position for some time.
Scholz insisted that the Uniper bailout was “unique”, but did not rule out the government coming to the aid of other utility companies.
Uniper, as the largest importer of Russian gas in Germany, which sells electricity and gas to wholesale customers, was “a company of vital importance for the economic development of our country and for the energy supply of our citizens,” Scholz said, saying the funds would give Uniper the chance to stabilize for the future.
Finnish energy company Fortum, which has the biggest stake in Uniper, has agreed to the plan. The company has been under increasing pressure for weeks after being forced to scramble to source gas from alternative sources.
Meanwhile, the location of a repaired turbine, part of Operation Nord Stream, although known to the government, is kept secret. Habeck accused Russia of appearing to have “little interest” in his return. It was repaired in Canada and returned to Germany earlier this month and is being kept in a secret location until Russia provides the necessary documents for its shipment. Russia used the turbine as an excuse for its inability to supply the full amount of gas it is contractually obligated to supply.