BRUSSELS – On Wednesday, Germany nationalized gas importer Uniper (UN01.DE), and Britain capped the wholesale cost of electricity and gas for businesses, in Europe’s latest moves to keep the lights on and the heaters running this winter as the conflict in Ukraine escalates.
Russian President Vladimir Putin exacerbated the pain in global energy markets by announcing a partial Russian military mobilization, threatening to further tighten global fuel supplies.
European gas and power prices have skyrocketed as Russia reduces fuel exports in retaliation for Western sanctions over its invasion of Ukraine, leaving consumers with astronomical bills and utilities in a liquidity crisis.
“We have intervened to prevent businesses from collapsing, protect jobs, and limit inflation,” said Britain’s finance minister, Kwasi Kwarteng.
While many businesses are facing higher bills, more than 20 British power providers have gone bankrupt, many of them due to a government price cap that prevented them from passing on the full impact of rising fuel costs to consumers.
European gas prices rose on Wednesday, after Putin’s announcement, hitting RM957.58 per megawatt hour (MWh), still below this year’s peak of around RM1549.29 but more than 200% higher than a year ago. Oil prices rose 2%.
The European Union, which once relied on Russia for about 40% of its gas needs, has been racing to find other supplies.
“The (Russian) move could possibly lead to calls for more aggressive action against Russia in terms of sanctions from the West,” said Warren Patterson, head of commodities research at ING.
Germany’s Uniper, once heavily reliant on Russian gas imports, has been among the most high-profile casualties, facing a liquidity crunch as Russia turned off the tap and sent prices soaring.
After efforts to shore up the utility with a multi-billion euro cash injection proved inadequate, the government agreed to buy the remaining stake owned by Finland’s Fortum (FORTUM.HE) to keep the company running, giving the state a 99% holding. read more
‘Do Everything Possible’
“The state will … do everything possible to always keep the companies stable on the market,” German Economy Minister Robert Habeck said, announcing the Uniper move and other steps to help Germany avoid energy rationing this winter. read more
The agreement involves a capital injection of 8 billion euros (RM36.15 billion), Uniper said, a move that brings the government’s total capital injection so far to at least 29 billion euros.
Germany was more reliant than many others in Europe on Russian gas, mostly supplied via the Nord Stream 1 pipeline. Russia halted flows through the pipeline, blaming Western sanctions for hindering operations. European politicians call that a pretext and say Moscow is using energy as a weapon.
The German government has already put Gazprom Germania, a unit of Kremlin-controlled Gazprom, and a subsidiary of Russian oil company Rosneft (ROSN.MM) under trusteeship – a de facto nationalisation. Smaller companies have also asked for help.
Fortum Chief Executive Markus Rauram said selling the firm’s stake in Uniper was a painful but necessary step, adding that the company which is majority owned by the Finish state lost about 6 billion euros with its Uniper investment.
Russia’s gas flows to Europe via Ukraine have continued but at lower levels. Gazprom (GAZP.MM) said it would ship 42.4 million cubic metres of gas to Europe via Ukraine on Wednesday, in line with recent days.
Eastbound gas flows via the Yamal-Europe pipeline to Poland from Germany were halted on Wednesday, while Russian supply via Ukraine held stable.
In the United States, Democratic and Republican senators on Tuesday proposed that U.S. President Joe Biden’s administration use secondary sanctions on international banks to strengthen plans for price cap by G7 countries on Russian oil.
Moscow has said it would cut all oil and gas flows to the West if such cap was implemented.
The move by U.S. lawmakers came hours before Putin ordered Russia’s first mobilisation since World War Two, warning the West that if it continued what he called its “nuclear blackmail” Moscow would respond with its vast arsenal.
Several countries have banned imports of Russian crude and fuel, but Moscow has managed to maintain its revenues through increased crude sales to Asia. – Reuters