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German authorities to nationalize energy companies in a crisis and wean the country off Russian gas in two years

Germany's Federal Ministry for Economic Affairs and Climate prepared a bill that would enable the state to nationalize energy companies under extreme circumstances. This would be available as a drastic measure if fiduciary administration is not sufficient to guarantee the nation’s energy security. In conversation with The Insider, oil and gas market expert Mikhail Krutikhin explains that, in doing so, Germany is looking to avoid political blackmail on the part of Gazprom and that the country may be able to wean itself from dependency on Russian natural gas within two years.

The German authorities’ stance is understandable, even justifiable. Gazprom currently owns 20% of the country's gas storage capacity, which is perceived as a threat not only to Germany's energy security but also to its national security as a whole. As it suddenly turns out, these facilities are being leveraged as a tool of political pressure on Germany and Europe. Many ask themselves the same question: “How did it happen that such a sensitive asset is controlled by a company that isn't only commercial but also political?” It happened because the Kremlin had been using Gazprom as a political tool since 2005. It uses natural gas supplies, including the content of the German facilities, for political blackmail.

When I asked my German acquaintances: “How did that happen? Was it a conscious betrayal of Germany's national interests? Was it corruption or common stupidity?” They responded it had been shortsightedness. It appears that the Germans are bent on remedying the situation and making sure that such critical infrastructure isn’t controlled by an alien, hostile, politically-motivated organization.

Gazprom no longer has a stake in the companies that control German underground gas storage facilities, among other objects, leaving these companies “orphaned”. The Russian giant is taking legal steps to find new owners for these entities.

Meanwhile, Germany is actively stocking natural gas in its underground facilities. If they are controlled by German private or public sector entities, the country will continue purchasing gas. This way, Germany safeguards itself from reliving last year's scenario, when Gazprom made a point of leaving its share of storage facilities empty and put all of Europe on the brink of a gas crisis. We have already witnessed Germany issue a directive scheduling the filling of such facilities. The schedule features monthly targets with percentages to avoid facing the same problem next winter as they faced last winter because of Gazprom.

German officials have already stated the possibility of weaning the country off Russian natural gas within two years. It’s hard to say how specifically they intend to achieve this, considering Germany’s dependence on gas supplies. But I believe it's doable, even on such a tight timeline, if they are willing to sustain significant financial losses. Getting additional volumes of gas would require offering a higher price than Asian consumers – that is, paying more for liquefied natural gas than Japan, China, and other countries do. Germany might even have to limit the capacity of certain traditionally important industries that consume a lot of gas, such as the chemical industry or steel production. They will have to tighten their belts for a while, but it will give them the freedom from Russia’s pressure in the form of natural gas blackmail further down the line.

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