Europe burns cash to help companies worsen energy crisis

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By Kirsti Knolle, William James and Anne Kauranen

BERLIN/LONDON/HELSINKI (Reuters) – Germany nationalized gas importer Uniper on Wednesday and Britain capped wholesale electricity and gas prices for businesses, as Europe did splurging to keep lights and heaters on this winter amid an escalating war in Ukraine.

Russian President Vladimir Putin added to energy price pain on Wednesday, pushing up oil and gas prices by announcing a partial military mobilization.

European governments have already earmarked nearly 500 billion euros ($496 billion) over the past year to protect citizens and businesses from soaring gas and electricity prices, according to a published study. by the think tank Bruegel.

Russian cuts to gas supplies to Europe in retaliation for Western sanctions on Moscow over its invasion of Ukraine have exposed utilities to exorbitant spot prices, with the rush for alternative supplies helping to drive up consumer bills.

Uniper has been one of the companies’ biggest casualties, with Germany earmarking an additional €8 billion in the latest stage of its bailout while Britain said its new plan would cost “tens of billions of pounds “. Among the big spenders, France will allocate 9.7 billion euros to take full control of EDF.

“We stepped in to prevent businesses from collapsing, protect jobs and limit inflation,” UK Finance Minister Kwasi Kwarteng said, while another cabinet member said the final cost of his energy support would depend on rising prices.

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.

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 nearly 3%.

INCREASED RISKS

“The partial mobilization is definitely a bullish factor as it increases the risks of a protracted war in Ukraine,” said Viktor Katona, senior crude analyst at Kpler.

The full nationalization of Uniper follows a multi-billion euro cash injection that proved insufficient.

The German government will buy out the remaining stake held by Finland’s Fortum to give the state a 99% stake.

“It’s clearly not sustainable from a public finance point of view,” said Simone Tagliapietra, senior researcher at Bruegel, of the EU 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 help Germany avoid energy rationing this winter, said: “The state will do everything possible to that companies always remain stable in the market”.

Nationalization 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, under trusteeship – a de facto nationalization. Adding the Uniper bailout, the bill comes to around 40 billion euros.

Fortum CEO Markus Rauram said the sale of the company’s stake in Uniper was a painful but necessary step, adding that the majority Finnish state-owned company had lost around 6 billion euros on its investment in Uniper.

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.

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.

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

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.

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

($1 = 1.0087 euros)

(Reporting by Reuters bureaus; Writing by Ingrid Melander; Editing by Edmund Blair and Jason Neely)

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