# Exclusive-Germany prepares crisis plan for abrupt end to Russian gas – sources
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-05-09
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: German Officials Prepare Emergency Package for Russian Gas
Meta Description: Amid fears of a potential sudden halt in Russian gas supplies, Germany is quietly preparing an emergency package to take control of critical firms. Learn more here.
URL: https://financedigest.com/exclusive-germany-prepares-crisis-plan-for-abrupt-end-to-russian-gas-sourceshtml

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By John O’Donnell

BERLIN (Reuters) – German officials are quietly preparing for any sudden halt in Russian gas supplies with an emergency package that could include taking control of critical firms, three people familiar with the matter told Reuters.

The preparations being led by the Ministry for Economic Affairs show the heightened state of alert about supplies of the gas that powers Europe’s biggest economy and is critical for the production of steel, plastics and cars.

Russian gas accounted for 55% of Germany’s [imports last year and Berlin has come under pressure to unwind a business](https://www.financedigest.com/the-importance-of-property-care-looking-after-your-business.html "The Importance of Property Care: Looking After Your Business") relationship that critics says is helping to fund Russia’s war in Ukraine.

Germany has said it wants to wean itself off Russian [supplies but expects](https://www.financedigest.com/gsk-expects-us-launch-of-rsv-vaccine-with-no-supply-issues.html "GSK expects US launch of RSV vaccine with no supply issues") to be largely reliant on Moscow for gas until the middle of 2024.

It remains unclear whether an abrupt halt would happen and the officials said Germany wanted to avert an escalation, such as by backing a European gas embargo, having already supported [sanctions against Moscow on coal and oil](https://www.financedigest.com/oil-spills-and-near-misses-more-ghost-tankers-ship-sanctioned-fuel.html "Oil spills and near misses: more ghost tankers ship sanctioned fuel").

But they now fear [Russia could cut](https://www.financedigest.com/pimco-cut-big-position-in-russia-cds-by-adding-bonds-in-q2.html "PIMCO cut big position in Russia CDS by adding bonds in Q2") off gas flows unilaterally and want to be able to cope if it does.

While a broad framework is in place and the government is determined to help, the [details of how it will put the plan](https://www.financedigest.com/factbox-u-s-offers-new-details-on-plan-to-cap-russian-oil-prices.html "Factbox-U.S. offers new details on plan to cap Russian oil prices") into action are now being thrashed out, the officials said.

The government would back granting further loans and guarantees to prop up [energy firms](https://www.financedigest.com/varo-energy-buys-80-of-dutch-biogas-firm-aims-to-double-capacity-by-2026.html "Varo Energy buys 80% of Dutch biogas firm; aims to double capacity by 2026"), helping them cope with soaring prices, and could take critical companies, such as refineries, under its wing, the three officials said.

Asked for comment on the measures, Germany’s [economy ministry](https://www.financedigest.com/german-economy-expected-to-skirt-recession-economy-ministry-report.html "German economy expected to skirt recession – economy ministry report") pointed to statements by its head, Vice-Chancellor Robert Habeck, that the country had made “intense efforts” in recent weeks to reduce its use of Russian energy.

Last month, Berlin approved a [legal change](https://www.financedigest.com/hungary-pledges-legal-changes-to-secure-eu-recovery-funding-govt.html "Hungary pledges legal changes to secure EU recovery funding – govt") to allow it take control of energy companies as a last resort.

It is now discussing how it could use the measure in practice, such as by taking control of the PCK refinery [operated by Russia’s](https://www.financedigest.com/kfc-franchisees-in-russia-ask-govt-to-halt-sale-of-stores-to-local-operator-ria.html "KFC franchisees in Russia ask govt to halt sale of stores to local operator – RIA") Rosneft in Schwedt near Poland, two of the people said. It accounts for most of Germany’s remaining Russian oil imports and could be hit by a [European Union](https://www.financedigest.com/explainer-why-malaysia-is-considering-a-ban-on-palm-oil-exports-to-the-european-union.html "Explainer-Why Malaysia is considering a ban on palm oil exports to the European Union") oil embargo.

Rosneft [declined to comment on any possible German](https://www.financedigest.com/around-40-of-german-companies-expect-output-decline-in-2023-iw-institute.html "Around 40% of German companies expect output decline in 2023 – IW institute") action.

ENERGY NATIONALISATION?

One of the people said the nationalisation of energy companies was an [option being considered](https://www.financedigest.com/3-options-to-consider-when-you-owe-the-irs-back-taxes.html "3 Options to Consider When You Owe The IRS Back Taxes") but it would have to be weighed carefully and justified on the grounds of securing energy supplies rather than to punish Russia.

[Germany could also take stakes](https://www.financedigest.com/kuehne-raises-lufthansa-stake-to-17-5-as-germany-sells-remaining-shares.html "Kuehne raises Lufthansa stake to 17.5% as Germany sells remaining shares") in other companies, said two people familiar with the matter. In 2018, it made a similar move when state development bank KfW bought [20% of energy network operator](https://www.financedigest.com/ubisoft-vows-to-get-back-to-operating-margin-above-20-in-medium-term.html "Ubisoft vows to get back to operating margin above 20% in medium term") 50Hertz to fend off an offer from China’s State Grid.

The final government emergency package has not yet been finalised. One of the people [cautioned that taking minority stakes in companies and intervention at the Schwedt refinery remained](https://www.financedigest.com/iran-open-for-business-but-caution-remains-the-watchword.html "Iran: ‘open for business’ – but caution remains the watchword") under discussion but had not been decided.

Officials are also examining how KfW can alleviate pressure on critical companies by supporting them with further loans, or emergency credit lines they could use if energy [prices soar and trigger costly margin calls on their market](https://www.financedigest.com/german-residential-property-market-faces-risk-of-price-drop-diw-study.html "German residential property market faces risk of price drop – DIW study") positions.

Earlier this year, KfW helped German energy firm Uniper, EnBW’s gas division VNG and coal-fired [power plant](https://www.financedigest.com/edpr-brings-iberias-first-wind-solar-power-plant-on-stream.html "EDPR brings Iberia’s first wind-solar power plant on-stream") operator Leag cope with volatility in energy markets.

KfW [declined to comment on which companies](https://www.financedigest.com/payment-security-compliance-declines-only-1-in-3-companies-globally-make-the-grade.html "Payment security compliance declines – only 1 in 3 companies globally make the grade") it had helped.

Germany is also examining how it would ration gas in an emergency. Its regulator is considering whether to give industry priority over households, which would be a reversal of the current policy where [businesses would be cut](https://www.financedigest.com/lighting-maker-signify-cuts-2022-outlook-again-on-china-business-lighting.html "Lighting maker Signify cuts 2022 outlook again on China, business lighting") off first.

The discussions are unfolding against the backdrop of war in Ukraine and an increasingly charged stand-off between Moscow and Brussels, which has [backed tough sanctions to isolate Russia](https://www.financedigest.com/russia-sharply-scales-back-far-east-war-games-with-china.html "Russia sharply scales back Far East war games with China").

[Russian President Vladimir Putin told his armed forces at a parade on Monday they were fighting for their country but offered no clues as to how long their assault on Ukraine](https://www.financedigest.com/ukraine-grants-citizenship-to-top-russian-journalist-who-denounced-war.html "Ukraine grants citizenship to top Russian journalist who denounced war"), which the Kremlin calls a special military operation, would last.

ECONOMIC SPIRAL

Russia’s Gazprom halted gas exports to Poland and Bulgaria last month after they refused to [pay in roubles but the Kremlin has rejected accusations by the European Commission that Moscow was using natural](https://www.financedigest.com/best-paying-jobs-in-natural-gas-distribution.html "Best paying jobs in natural gas distribution") gas supplies as blackmail.

The Kremlin and Gazprom have repeatedly said that Russia was a reliable [energy supplier](https://www.financedigest.com/french-energy-suppliers-will-let-struggling-bakers-renegotiate-contracts-le-maire.html "French energy suppliers will let struggling bakers renegotiate contracts – Le Maire").

The Kremlin and [Gazprom did not immediately respond to a request for comment about the reliability of supply](https://www.financedigest.com/germanys-uniper-to-restart-coal-fired-power-plant-as-gazprom-halts-supply-to-europe.html "Germany’s Uniper to restart coal-fired power plant as Gazprom halts supply to Europe").

After hesitantly [backing sanctions on coal](https://www.financedigest.com/back-to-black-germanys-coal-power-plan-hits-hurdles.html "Back to black? Germany’s coal power plan hits hurdles") and oil, Berlin also now wants to draw a line, four officials said.

They are concerned that curbing gas as well could [send prices rocketing](https://www.financedigest.com/spacex-rocket-sends-first-global-water-survey-mission-into-orbit.html "SpaceX rocket sends first global water survey mission into orbit"), allowing Moscow to cash in on sales outside the EU and thus still failing to drain its war chest.

The officials said Germany was reaching the limit of [sanctions it could impose](https://www.financedigest.com/new-u-s-sanctions-imposed-for-russian-bank-oligarchs-crypto-miner-bitriver.html "New U.S. sanctions imposed for Russian bank, oligarchs, crypto miner BitRiver") without triggering an economic spiral, with even those in the governing coalition wholeheartedly behind penalising Moscow wary of imposing sanctions on gas.

Berlin has also been swayed by captains of German industry, including chief executives of its [biggest listed companies and representatives of firms](https://www.financedigest.com/uk-firms-plan-biggest-pay-rises-since-2012-to-fill-staff-gaps.html "UK firms plan biggest pay rises since 2012 to fill staff gaps") with ties to Russia, who have regularly met and lobbied officials not to ban gas, one person with knowledge of the matter said.

Company executives have [told Berlin they are preparing to pare back Russian energy](https://www.financedigest.com/germans-told-to-unite-over-energy-crisis-amid-eu-divisions.html "Germans told to unite over energy crisis amid EU divisions") ties in any event, but appealed to the government not to force them to do so immediately, said a second person familiar with those discussions.

(Additional reporting by Christoph Steitz in Frankfurt; Editing by David Clarke)


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