Germany is saving a former Gazprom unit it had expropriated in April with a multi-billion-euro loan to ensure security of supply, the German government said in a statement.
Gazprom Germania GmbH was the German unit of Gazprom until a few months ago before the German government placed Gazprom Germania under the trusteeship of the German energy regulator to ensure security of supply after Russia invaded Ukraine.
Last month, Gazprom halted gas supply to Gazprom Germania in retaliation for Western sanctions, as Russia imposed sanctions on Gazprom's subsidiaries in Europe, banning them from supplying Russian gas.
Without Russian gas, Gazprom Germania has had to buy gas at higher prices on the spot market.
Gazprom Germania has several storage sites in Germany, including the biggest one in the country. Without financial support, the firm may be unable to fill the gas storage to the levels Germany and the EU require before next winter to prevent gas shortages.
Since Gazprom Germania is critical to Germany's gas supply and infrastructure, the government deems it necessary to secure the ongoing business operations of the company.
Therefore, Germany is now stepping up and ensuring the long-term trusteeship of Gazprom Germania, which has now been renamed Securing Energy for Europe GmbH (SEFE), to secure energy supply to Germany and Europe, the government said.
Europe's biggest economy is also granting a loan from its state investment bank KfW to the company to save it from insolvency, the government added. The money will be used to secure liquidity and to purchase gas to replace Russian deliveries and to prevent a cascading insolvency effect on the German energy market.
KfW's loan to the former Gazprom unit will be between $9.44 billion (9 billion euro) and $10.5 billion (10 billion euro), a source in the German cabinet told Reuters.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More