Europe burns cash to help businesses in energy crisis

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  • Gas prices in Europe soared amid Ukraine crisis
  • Utilities face a cash crunch
  • Germany ‘will do everything possible’ to help businesses
  • Russian mobilization triggers soaring oil prices

BERLIN/LONDON, Sept 21 (Reuters) – Germany nationalized gas importer Uniper (UN01.DE) on Wednesday and Britain said it would cut companies’ energy bills in half in response to the aggravation of the energy crisis which revealed Europe’s dependence on Russian fuel.

Russian President Vladimir Putin added to the upward pressure on energy prices by announcing a partial military mobilization, in the biggest escalation in the war in Ukraine since the February 24 invasion of Moscow.

European governments had already earmarked nearly 500 billion euros ($496 billion) last year to protect citizens and businesses from soaring gas and electricity prices, according to research by the think tank Bruegel. Read more

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Uniper was one of the biggest casualties, with Germany slated for an additional €8 billion on Wednesday in the final stage of a €29 billion bailout.

France, also among the big spenders, will allocate 9.7 billion euros to take full control of the utility EDF (EDF.PA).

Britain has said its new business aid package will cost “tens of billions of pounds”.

“We stepped in to prevent businesses from collapsing, protect jobs and limit inflation,” UK Finance Minister Kwasi Kwarteng said of the cap on wholesale electricity and gas costs for companies, which should apply from 1 October

More than 20 UK electricity suppliers collapsed, many of which collapsed because a price cap by the government prevented them from passing on the price spike. Read more

Full nationalization of Uniper will involve the German government‘s takeover of Finnish Fortum (FORTUM.HE) to give the state a 99% stake. Read more

“It’s clearly not sustainable from a public finance perspective,” Bruegel senior researcher Simone Tagliapietra said of the EU’s energy crisis bill.

“Governments with more fiscal space will inevitably manage the energy crisis better by competing with their neighbors for limited energy resources during the winter months.”

“DO EVERYTHING POSSIBLE”

German Economy Minister Robert Habeck, announcing Uniper’s decision and other measures to avoid energy rationing this winter, said: “The state will do everything possible to ensure that companies always remain stable in the market. Read more

Unification gives the German government control of certain assets in Russia, a government spokesman said, adding that it was considering what to do with them.

Germany was more dependent than many others in Europe on Russian gas, mainly supplied through the Nord Stream 1 gas pipeline. Russia halted flows through the pipeline, blaming Western sanctions for hampering operations. European politicians call it a pretext and say that Moscow uses energy as a weapon.

The German government has already placed Gazprom Germania, a Kremlin-controlled unit of Gazprom, and a subsidiary of Russian oil company Rosneft (ROSN.MM) under trusteeship – a de facto nationalization. Including the Uniper bailout, the bill comes to around 40 billion euros.

ABUNDANT TAX

Meanwhile, a debate rages in Europe over whether oil companies making record profits due to the energy crisis should pay additional taxes to help consumers cope with soaring inflation.

TotalEnergies (TTEF.PA) CEO Patrick Pouyanne said on Wednesday that the French energy group risked facing more than a billion euros in additional levies if a proposed EU regime to impose additional taxes on oil and gas companies was approved. Read more

European gas prices hit 212 euros per megawatt-hour (MWh) on Wednesday, below this year’s peak of around 343 euros but up more than 200% from a year earlier. Oil prices rose 3% in early trading, but then gave up those gains.[OR}[O/R}[OU}[O/R}

“Partial mobilization (in Russia) is definitely a bullish factor as it increases the risks of a protracted war in Ukraine,” said Viktor Katona, senior crude analyst at Kpler. Read more

Gas flows from Russia to Europe via Ukraine were stable on Wednesday while gas flows eastwards via the Yamal-Europe pipeline to Poland from Germany were halted. Read more

In the United States, Democratic and Republican senators on Tuesday proposed that President Joe Biden’s administration use secondary sanctions against international banks to bolster price cap plans by G7 countries on Russian oil. Read more

Moscow has said it will cut off all oil and gas flows to the West if such a cap is put in place.

Several countries have banned imports of Russian crude and fuel, but Moscow has managed to maintain its revenue thanks to increased sales in Asia.

The move by U.S. lawmakers came hours before Putin ordered Russia’s first mobilization since World War II, warning the West that if he continued what he called his ‘nuclear blackmail’, Moscow would respond. with his vast arsenal. Read more

($1 = 1.0087 euros)

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Reports from Reuters offices; written by Ingrid Melander; edited by Edmund Blair, Jason Neely and Jane Merriman

Our standards: The Thomson Reuters Trust Principles.

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