German Government to Take Control of Gazprom’s German Subsidiary

Industrial facilities of PCK Raffinerie oil refinery in Schwedt/Oder, Germany, on March 8, 2022. (Hannibal Hanschke/File Photo/Reuters)

The German government will take control of Gazprom Germania—the energy trading, storage, and transmission German subsidiary of Russia’s Gazprom—after being abandoned by its parent company on April 1.

Gazprom left Germany without warning on April 1, after the German business daily Handelsblatt reported on March 31 that Berlin was considering expropriating all Gazprom and Rosneft assets in the country amid concerns about the security of energy supplies.

The Russian oil company gave no public details on its decision to terminate its stake in its holdings in Germany, which include subsidiaries in Britain, Switzerland, and the Czech Republic.

The gas company’s operations will be transferred to Germany’s regulatory Bundesnetzagentur (BNetzA), also known as the Federal Network Agency, to ensure energy security, said Economy Minister Robert Habeck on April 4, as tensions worsen between Russia and the European Union over gas and oil supplies.

“The arrangement of the trust administration serves to protect public safety and order and to maintain the security of supply,” Habeck said at a press conference. “This step is urgently necessary.”

Berlin has accused Gazprom of trying to sell its assets in Germany to Russian-controlled entities without prior approval from the German government, thus violating German law.

The economic ministry said that it warded off an unauthorized acquisition of the gas company by Russia’s JSC Palmary and Gazprom Export Business Services after Gazprom attempted to transfer ownership to those companies.

The seizure was also triggered by the sudden confusion on who now owns the assets after the parent company withdrew last week, said Habeck.

The German federal agency will act as the temporary trustee for Gazprom Germania for six months until Sept. 30, until the legal situation is cleared.

The order to take control of the company was immediately published by the German government in the Federal Gazette.

Berlin said that it remains unclear why Gazprom attempted to transfer ownership and why it did not communicate its intent to the German authorities.

German law requires that foreign acquisitions or transfers of strategic assets, such as energy infrastructure, must be approved by authorities if the buyer is a company from a non-EU third country.

Gazprom was mandated to seek German government authorization before transferring its assets in the country to a new owner.

The economic ministry in Berlin reserves the right to block or approve such a transaction.

Meanwhile, the energy minister said that the gas supply would continue, after Gazprom declared that it would fulfill its contract to export energy to Germany.

Gazprom Germania was responsible for maintaining and operating Gazprom’s energy infrastructure in Germany, including storage, trade, and the transportation of natural gas to Central Europe.

The BNetzA will be given the power to remove executives, control staff operations, and direct the company’s management.

“Our goal will be to run Gazprom Germania in the interests of Germany and Europe,” said Klaus Mueller, head of the BNetzA.

Habeck said that he would direct his ministry to reduce Russia’s indirect economic influence on other parts of the German energy industry, and said that he would look into Rosneft’s bid to buy into German refinery PCK Schwedt.

Germany had agreed to partake in certain Western sanctions against Moscow, including a pledge to cease its dependence on gas imports from Russia by 2024 and end Russian oil imports by the end of the year.

On Feb. 22, Berlin suspended the Nord Stream 2 pipeline project that was designed to dramatically increase the flow of Russian gas to Germany.

U.S. and European sanctions against Moscow after Russia’s invasion of Ukraine have triggered concerns that Russia will cease its commitment to provide oil and gas supplies to the EU.

Germany is heavily dependent on Russia for its energy needs, with 40 percent of its gas and about a third of its oil coming from Russia last year.

Over the last 20 years, consecutive German governments have gradually increased the country’s dependence on cheap energy imports from Russia.

German industry has put heavy pressure on the government in Berlin, which has so far rejected an outright ban on Russian gas imports amid fear that an embargo would destroy a German economy that is heavily dependent on foreign energy for heating, power generation, and industrial production.

President Vladimir Putin announced in March that Russia would only receive rubles as payment for gas exports from countries deemed “unfriendly” as of April 1.

The German government and other European nations have mostly balked at such a move, saying that they would continue to pay for Russian gas contracts in euros or dollars, which is the global norm.

Putin responded by outlining a plan where European customers would pay in euros or dollars to a Russian bank, which would then buy rubles to pay for the deliveries.

If accepted, the new regulations would cover payments for Russian energy contracts that must be paid later this month.

Last week, the German government activated the first stage of its contingency plan designed to protect the country against a potential reduction in Russian gas deliveries.

The worst-case scenario in the plan envisions gas and oil being rationed throughout Germany if energy supplies are seriously interrupted.