Germany: Crisis plan for Moscow threatening to cut off gas flows

German officials are quietly preparing for a possible shutdown of Russian gas supplies with an emergency package that could include controlling critical operations, Reuters reported, citing three people familiar with the matter.

Preparations – being carried out by the Ministry of Finance – show the alarming state of gas supplies in Europe’s largest economy, supplies that are critical to the production of steel, plastics and cars, according to Reuters.

Russian gas accounted for 55 percent of Germany’s imports last year, and Berlin is now under pressure to sever a business deal critics say is helping to fund Russia’s war in Ukraine.

Germany has said it wants to wean itself off Russian supplies, but expects to continue to depend heavily on Moscow for gas until mid-2024.

It remains unclear whether a sharp supply cut will follow in the coming months. German officials say Germany wants to prevent an escalation, such as by backing a European gas embargo, having already backed sanctions on Moscow over coal and oil.

However, they now fear that Russia could unilaterally cut off gas supplies and want to be able to deal with the situation created by such a move by Moscow.

Although a broad framework has been set up and the government is determined to help, details of how the plan will be implemented are now being considered in more detail, officials say.

In that scenario, the government would also support new loans and guarantees to support energy companies, helping them cope with rising prices, while it could take critical companies such as refineries under its protection, the three officials said. .

Asked about the new measures, the German Ministry of Economy noted the statements of its head, Vice Chancellor Robert Habeck, that the country had made “intensive efforts” in recent weeks to reduce the use of Russian energy.

Last month, Berlin approved a legal change that would allow it to take control of energy companies as a last resort.

He is now discussing how he could put the measure into practice, such as taking control of PCK Raffinerie, which operates under Russia’s Rosneft, two sources said. Rosneft declined to comment on any possible German action.

One source also said that the nationalization of energy companies is an option being considered, but should be carefully weighed and justified on the basis of securing energy supply, rather than punishing Russia.

Germany could also take shares in other companies, say two sources familiar with the matter. In 2018, it made a similar move when state-owned development bank KfW bought a 20% stake in the 50Hertz power grid to block an offer from the Chinese state grid.

The final government package has not yet been finalized. One of the sources warned that all these options are still under discussion and have not been finalized.

Officials are also looking at how KfW can ease the pressure on critical businesses by offering new loans or emergency credit lines.

Germany is also considering how to prioritize supplies in the event of an emergency. The competent regulatory authority is considering whether to give priority to industry over households, which would be contrary to the existing policy which stipulates that supplies will be cut off first to businesses.

Berlin is approaching the limits of sanctions

However, Berlin believes that a decision to impose an embargo on gas will give Moscow the opportunity to make increased profits from sales outside the EU. as prices will jump.

Officials say Germany is approaching the limit on sanctions it can impose without sparking a downturn – with even those who wholeheartedly support sanctions against Moscow being wary of imposing gas sanctions.

Berlin has been influenced by German industry leaders, including executives of the largest listed companies and representatives of companies with ties to Russia, who hold regular meetings and pressure officials not to ban gas, Reuters reports. knowledge of the subject.

Businesses in Berlin have said they are preparing to curtail Russian energy ties in any case, but have called on the government not to force them to do so immediately, according to a second source familiar with the matter.