Gazprom sellout breakout triggers cunning German attack

The logo of Gazprom Germania is pictured at its headquarters, in Berlin, Germany, April 1, 2022. REUTERS/Fabrizio Bensch

Join now for FREE unlimited access to Reuters.com

Register

MILAN, April 5 (Reuters Breakingviews) – A Russian mistake is helping Germany solve its energy security problem. Olaf Scholz’s government took control of the European operations of Gazprom (GAZP.MM) on Monday after the $73 billion gas major attempted to sell them without seeking Berlin’s prior approval. The move secures critical assets such as gas storage facilities, without the upfront costs of disorderly nationalization.

Through its Gazprom Germania unit, the Russian energy giant has for years owned large gas storage facilities, crucial to ensuring sufficient hydrocarbon reserves in Germany and beyond. It seemed utterly impractical once Moscow invaded Ukraine in February. The European Commission seeks to law Project which will oblige European Union Member States to certify that non-European ownership of critical gas infrastructure does not threaten the security of gas supply. Still, nationalizing assets could be costly and open the door to litigation.

Gazprom’s clumsy attempt to sell your European unit to two little-known Russian-controlled entities offered Berlin a way out. Gazprom did not report the sale, the government says, allowing it to step in and place the assets, which include large subsidiaries in Britain, Switzerland and the Czech Republic, under the direction of the German regulator. energy until September 30. While ultimate ownership remains with Gazprom, the regulator has the right to appoint and dismiss executives and veto divestitures.

Join now for FREE unlimited access to Reuters.com

Register

The bond secures Germany’s infrastructure. It could also stabilize energy suppliers like Wingas, which controls 20% of the German market, and Gazprom Marketing & Trading, which supplies around a fifth of UK commercial gas, by assuring their customers that the parent company is under Western control. This decision is also gratuitous since Berlin did not expropriate Gazprom’s assets.

But the movement does not ultimately settle the question of ownership. Berlin is considering nationalizing the German assets of Gazprom and Rosneft (ROSN.MM), the Handelsblatt reported last week. This is legally possible but would require the payment of a heavy indemnity. Gazprom Germania had total assets of €8.4 billion and equity of €2.2 billion in 2020, according to regulatory filings.

Another option is to find new owners for the Russian assets. This would still amount to persuading investors to buy an asset formerly controlled by the Russian giant. Bringing in the state lender KfW could help. Either way, Gazprom’s misstep at least buys Scholz time to find a long-term solution.

To follow @LJucca on Twitter

(The author is a Reuters Breakingviews columnist. The views expressed are her own.)

BACKGROUND NEWS

– The German government on April 4 took temporary control of Gazprom Germania, a European unit of the Russian gas major which owns gas storage facilities in Germany and controls energy suppliers in countries including the United Kingdom.

– Berlin intervened after Gazprom Germania attempted to sell its assets to Russian-controlled entities without prior German government approval, violating German law, the German Ministry of Economic Affairs and Climate Action said in a press release. The acquirer had also ordered the liquidation of Gazprom Germania, according to the press release.

– Germany’s federal energy regulator will act as a trustee of Gazprom Germania until September 30 and will hold the Russian company’s voting rights. The ownership of Gazprom Germania remains with its Russian parent company.

Join now for FREE unlimited access to Reuters.com

Register

Editing by Neil Unmack, Streisand Neto and Oliver Taslic

Our standards: The Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and freedom from bias by principles of trust.

James R. Rhodes