MOSCOW, August 30 – PRIME, Andrey Karabyants. An emergency meeting is being held in the EU to coordinate actions aimed at curbing the rise in energy prices. After the reduction of Russian gas supplies, Uniper, Germany’s largest energy company, was on the verge of bankruptcy. In Berlin, they fear that the bankruptcy of Uniper will cause a domino effect.
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LESS GAS, HIGHER ELECTRICITY PRICES
Gazprom will completely stop deliveries via Nord Stream for three days from August 1 to carry out scheduled repairs. The West fears that repair work may be delayed indefinitely, and European countries will not receive gas in the amount necessary for the heating season.
Nord Stream with a capacity of 55 billion cubic meters m/y (over 150 million cubic meters/day) is the main gas pipeline through which Gazprom delivers to Europe. Now, due to technical problems, deliveries have dropped to 30-33 million cubic meters. m/day — 20% of the installed capacity of the gas pipeline. Brussels argues that the reduction in Russian gas supplies is a punishment for supporting Ukraine, against which the Russian armed forces are conducting a denazification operation.
On Monday, in Germany, the EU’s leading economy, for the first time in history, the price of futures contracts for the supply of electricity in 2023 exceeded 1,000 euros/MWh. Electricity prices are rising due to the expected further increase in the price of gas and other alternative fuels, primarily coal, after the start of the heating season.
Petr Fiala, Prime Minister of the Czech Republic, which currently holds the EU Presidency, is calling for an emergency meeting of European energy ministers. The meeting is necessary to coordinate actions aimed at curbing the rise in energy prices.
“Before the EU Energy Council meeting, we want to find a way to help people and businesses that we can agree with European leaders,” Fiala said. An emergency meeting is scheduled for September 9th.
Last week, the Czech government announced its intention to create a mechanism for limiting energy prices within the EU. Such a mechanism was proposed by the retired Italian Prime Minister Mario Draghi.
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Among European countries, Germany and Italy depend most on Russian gas supplies. Both countries are stockpiling fuel at an accelerated pace before the onset of winter, when energy demand peaks.
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German Economy Minister Robert Habeck said on Monday that the country’s underground storage facilities are more than 80% full. The German minister expects that large stocks will help to contain the rise in prices after the start of the heating season.
“As a result, the markets will calm down and prices will go down,” Haberk said with confidence.
Moreover, the German minister once again declared that Germany would not allow a domino effect like the one that occurred after the bankruptcy of Lehman Brothers.
“I promise on behalf of the German government that in any case we will ensure the solvency of all energy companies, and we will not have the Lehman Brothers effect on the market,” Harbeck said. The minister’s statement alludes to the failure of US investment bank Lehman Brothers, which triggered the 2008 global financial crisis.
This bank was one of the so-called “Big Five” – a group of the largest American investment banks. In addition to Lehman Brothers, the Big Five included Bear Stearns, Godman Sacks, Merrill Lynch and Morgan Stanley.
Only three banks survived the crisis of 2008: Lehman Brothers went bankrupt, Bear Stearns was bought by JP Morgan Chase at a ridiculous price of $236 million. The amount paid for Bear Stearns is fifteen times less than the capitalization of this bank on the eve of the crisis.
Only the intervention of the US Federal Reserve and the provision of financial assistance to investment banks, the amount of which is still unknown, prevented the bankruptcy of the entire Big Five.
FEAR OF THE DOMINO EFFECT
The coalition government of Germany, where the key positions of the minister of economy and the minister of foreign affairs are occupied by representatives of the “greens”, is pursuing an anti-Russian policy aimed at curtailing cooperation in the energy field.
On orders from Washington, Germany’s “greens” openly opposed the construction of the Nord Stream 2 gas pipeline. Gazprom managed to complete the construction on its own, despite US sanctions and opposition from the Greens, but the certification of Nord Stream 2 was suspended. After the start of the operation to denazify Ukraine, Berlin announced the closure of the project.
The German companies Uniper and Wintershall were Gazprom’s partners in the Nord Stream 2 project and took part in financing the construction of the gas pipeline. After the closure of the project, the losses of each company amounted to about 950 million euros.
Uniper is Germany’s leading energy company and the largest buyer of Russian gas. The reduction in supplies via Nord Stream has put Uniper on the brink of bankruptcy. On July 8, the company was forced to turn to the German government for financial assistance.
In the first half of 2022, Uniper’s loss exceeded 12 billion euros – the biggest financial loss in the history of the German company. Deprived of cheap Russian gas, Uniper is forced to buy exorbitantly expensive gas on the spot market in order to fulfill its obligations to its customers.
The Finnish company Fortum, the main shareholder of Uniper, held emergency talks with the German government. negotiations announced the provision of Uniper “comprehensive package of measures to stabilize the financial condition.”
The German government has agreed to acquire a 30% stake in Uniper and provide it with additional capital of up to 7.7 billion euros if needed, while KfW Bank has expanded the company’s credit line from 2 billion to 9 billion euros.
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The bankruptcy of Uniper could leave local utilities and many industries without gas, electricity and heat in the coming winter. Moreover, in Berlin they fear that the bankruptcy will cause a domino effect – the ruin of other companies that received gas and electricity from Uniper.
However, the allocated funds are not enough. Last week, Reuters reported that KfW was ready to provide Uniper with a $15 billion loan, significantly more than the “comprehensive package” provided.
Germany can overcome energy problems if it certifies and puts Nord Stream 2 into operation. However, this will mean the bankruptcy of the pro-American policy of the current German authorities, who are afraid of not pleasing the White House.
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