The German government said on Monday that it would nationalize a former subsidiary of Gazprom, Russia’s state-owned natural gas monopoly, to maintain the country’s energy security.
Last spring, Germany seized the company, formerly Gazprom Germania but now known as Securing Energy for Europe, or SEFE, and put it in a trust. By becoming sole owner, the German government can infuse the company with 225.6 million euros ($233 million), ensuring its immediate survival, the Economy Ministry said.
The European Commission approved the move over the weekend. The action was necessary, the ministry said, to stabilize the company’s finances and allow it to continue buying and distributing natural gas.
SEFE is the second natural gas provider that Germany has had to step in and save in the name of energy security since February, when Russia began weaponizing energy after its invasion of Ukraine. Berlin paid €8 billion in September to acquire Uniper, which had been driven to the brink of insolvency as Russia cut off supply of the natural gas to Europe.
SEFE owns several natural gas suppliers and storage facilities in Germany. The government placed it in a trust in April, after Gazprom sought to sell it to another Russian company with the intention to liquidate it. It later provided the company a loan of nearly €14 billion. With a 14 percent stake in Germany’s overall natural gas supply market and a 28 percent stake in its storage facilities — including Western Europe’s largest, in Rehden — the company was considered essential for ensuring Germany’s gas supply.
But the trusteeship left its ownership unclear. Western business partners and banks, fearful of getting entangled in European sanctions against Russia, were scared away, leaving the company deeply in debt and facing insolvency, the ministry said.
“The German government is now creating clarity in the ownership structure to stabilize the company and secure the supply of gas,” the ministry said announcing its decision.
Under Gazprom Germania, the storage facility in Rehden had been nearly drained empty by the start of 2022. Gas storage facilities are normally lower at the end of the winter, and the lack of almost any fuel caused alarm in Berlin. But because the facility remained in Gazprom’s hands, the German authorities could not contribute to replenishing it.
In the months since taking over the company, Germany has bought copious amounts of liquefied natural gas to refill the cavernous unit, bringing it up to nearly 95 percent of capacity.
The loan for SEFE is part of a €200 billion rescue package the German government put together to help companies and households cope with energy prices that have in some cases more than doubled within the span of a year. The high price of energy has driven German inflation into double-digit territory for the first time in decades.
Both SEFE and Uniper have suffered financially from the loss of Russian pipeline gas. The companies act as middlemen between natural gas producers and consumers, who have longstanding contracts for set prices. In the absence of gas from Russia, both companies have been forced to pay more for gas on the spot market, where traders buy and sell energy that is intended to be used right away, than they can recoup from their customers.
Gas prices have moderated in recent weeks, driven down as demand has eased because of all the gas now in storage and unusually mild fall temperatures that are expected to last throughout the winter. Analysts now say they expect Germany can make it through without having to ration gas.