As a post-sanctions German economy trudges along, its government is gearing up for a hefty bailout, sources told Bloomberg on Monday. A former unit of Russia’s energy company Gazprom, which was expropriated by the German government earlier this year, could receive a sum to the tune of €10 billion.
Gazprom Germania GmbH—in the trusteeship of German energy regulator Bundesnetzagentur since April—had been placed under its control to ensure energy security after Russia’s invasion of Ukraine. Last month, Gazprom reacted to the seizure by halting the flow of gas to its German subsidiary. With the inflow of Russian gas stopped, Gazprom Germania resorted to buying gas on the spot market—at much higher prices.
Now the German government, through the state-held bank KfW Group, could approve a loan for Gazprom Germania, ranging between €5 billion to €10 billion. Sources told Bloomberg this could come as early as this week, while adding that no final agreement has been drawn up and that everything is still subject to change.
Bundesnetzagentur told Bloomberg it refrains from speculation, but commented that all parties involved are “working intensively to keep business operations going.” Neither the finance ministry nor the spokeswoman for the economy ministry agreed to provide a comment.
Gazprom Germania has several storage sites in Germany, including the country’s largest. It owns Wingas GmbH, a supplier to many of the country’s industrial users (in particular Germany’s pride, its automotive industry). Additionally, the company has a retail business that in 2020 provided a fifth of the UK’s commercial gas. As a trading arm in London and a liquefied natural gas business, Gazprom Germania is a key player in Europe’s energy markets.
Without this multi-billions-worth shot in the arm however, the firm may be unable to provide the volume of gas that Germany and the EU (of which Germany is the economic motor) require. With winter coming, gas shortages are a real concern for industries and consumers alike. Germany, a major buyer of Russian natural gas, has been making contingency plans for nearly three months. The possibility that fossil fuel supplies from Russia could be disrupted either because of self-declared sanctions or retaliatory moves from Moscow remains a real one.
German subsidiaries of Russian companies, which are crucial to Germany’s economy, are an increasing headache to Chancellor Olaf Scholz’s government. While different options are open to it, ranging from trusteeship to state control, the latter has proved the most enticing.
In April, the ruling coalition (with considerable input from the Greens, whose Robert Habeck is minister of the economy, energy, and climate protection) made moves to allow for such an arrangement. A series of measures, backed by a setting up of financing tools by Scholz’s administration, would make it possible to take stakes in companies in case of a threat to supplies—in the form of a two-pronged approach, consisting of direct injection of capital, and a provision of KfW loans.
With the trusteeship set to end on September 30th, no concrete plans yet exist for Gazprom Germania’s future. What is clear however, is that a return to Russian ownership is not in the cards.