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Germany’s largest energy company Uniper is facing some $53 billion (51B euros) in extra costs for nationalization after Russia cut gas supplies to the struggling company. This comes after the cancellation of a gas levy designed to help German gas importers bear additional costs, with Berlin now needing to pump as much as 25 billion euros ($25.8 billion) of additional equity into Uniper to cover losses.
Back in September, the German government announced that it would ditch earlier plans for a gas levy on consumers and instead would introduce a gas price cap to curb soaring energy bills, with German Chancellor Olaf Scholz setting out a €200 billion ($194 billion) “defensive shield” to protect companies and consumers against the impact of soaring energy prices.
"The German government will do everything in its power to bring [energy] prices down. We are now putting up a large defensive umbrella ... which we will endow with €200 billion," Scholz said at a press conference in Berlin, which he attended virtually due to a Covid-19 quarantine.
The announcement was the culmination of days of negotiations between Economy Minister Robert Habeck from the Greens and Finance Minister Christian Lindner from the liberal Free Democrats.
“This decision is a crystal clear answer to [Russian President Vladimir Putin]. We are economically strong, and we mobilize this economic strength when necessary,’’ Lindner declared at the press conference.
Europe’s biggest economy is currently grappling with surging gas and electricity costs occasioned by a collapse in Russian gas supplies to Europe, with Moscow blaming the crisis on Western sanctions following its invasion of Ukraine in February.
Under the new plan, Berlin will introduce an emergency price brake on gas and electricity prices and also scrap a previously planned gas levy on consumers to avoid any further price increases. The gas levy, which was slated to come into effect from Saturday and remain in place until April 2024, was intended to help utilities cover the cost of replacing Russian supply. The government has also suspended its limit on new debt of 0.35% of gross domestic product this year.
Uniper has said that the country does not rule out undertaking gas rationing at some point following Russia's decision to halt gas flows via the Nord Stream 1 pipeline indefinitely.
By Alex Kimani for Oilprice.com
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Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.