BERLIN, Germany. November 21st, 2022. The German government announced on Wednesday it would fully-nationalize the gas company Uniper in response to Russian threats and rising gas prices.
Requiring €8.5 billion from the treasury, it included a necessary buyout of Finish gas giant Fortum. The nationalization will take several months and be fit into the national rationing plan for this winter.
Germany joins France as the second EU nation that has nationalized a gas company. The French government took control with a €12 billion buyout of all shares of France’s largest gas company, EDF, in July. Germany is also considering nationalizing other domestic gas suppliers VNG AG, and Securing Energy for Europe GmbH.
The EU launched an economic sanctions campaign against the Russian Federation in response to the invasion of Ukraine. Russia’s response was not immediate, but earlier in September they warned that if sanctions were not eased there would be no more natural gas deliveries to Europe, triggering the most severe energy crisis since at least the 1973 oil shock.
“Uniper is a central pillar of the German energy supply. As a result of the majority takeover decided today, the federal government has gained the essential say and control rights in the company in order to be able to ensure security of supply in Germany,” the Federal Ministry of Economics and Climate Protection said.
European gas prices rose more than 7% on Wednesday to €208 ($206.50) per megawatt hour. The EU last week proposed bloc-wide measures to respond to the increases, hoping to better coordinate national responses, including potential rationing.
Le Blitz d’Energia
These measures are just a part of a total half-trillion euro injection of government money into sheltering consumers from the consequences of the sanctions campaign.
The EU’s 27 countries have collectively allocated €450 billion while Britain has set aside €178 billion, according to Brussels-based think tank Bruegel. These include measures like caps on the price of energy, stock buyouts for nationalization of gas companies, and multi-billion-euro bailouts of major energy firms’ short positions on utilities futures.
Germany, the EU’s largest economy, has few completely nationalized industries, but many in which the state exercises strong interference, such as in the housing and auto industries.
An old saying of as goes Germany goes the EU, is an ominous one, as not only do public firms regularly underperform private ones, but standing on the shoulders of the Bundesbank will give Uniper a tremendous advantage, as it is no longer contained by profit-and-loss. Any objective it sees as necessary will be financed with the full backing of one of the most reputable banks on Earth.
“This is clearly not sustainable from a public finance perspective,” said Bruegel senior fellow Simone Tagliapietra.
“Governments with more fiscal space will inevitably better manage the energy crisis by outcompeting their neighbors for limited energy resources over winter months”.
Indeed Germany has already spent €100 billion to shield consumers from high prices, and to prepare for the winter months when natural gas is needed to heat homes. In comparison, just €200 million were spent on similar efforts in Estonia, where average winter temperatures are lower.
Nationalized companies not only lose the necessity of satisfying customers, but they essentially clear the sector of competition, preventing two of the most critical of all market signals (sales and competition) from helping the firm, in this case Uniper, optimize its service. Furthermore by placing things like price caps on energy bills, they are disincentivizing consumers and producers from adequately preparing or adapting for the reality of supply and demand. WaL