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Gazprom sale fumble triggers canny German pounce

The logo of Gazprom Germania is pictured at their headquarters, in Berlin, Germany, April 1, 2022. REUTERS/Fabrizio Bensch

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MILAN, April 5 (Reuters Breakingviews) – A Russian blunder is helping Germany address its energy security headache. The government of Olaf Scholz on Monday took control of Gazprom’s (GAZP.MM) European business after the $73 billion gas major tried to sell it without seeking prior approval from Berlin. The move secures critical assets like gas storage facilities, without the upfront costs of a messy nationalisation.

Through its Gazprom Germania unit, the Russian energy giant has for years owned some large gas storage facilities, crucial to ensure sufficient hydrocarbon reserves, in Germany and beyond. This looked eminently impractical once Moscow invaded Ukraine in February. The European Commission is looking to draft legislation that will require European Union member states to certify that non-EU ownership of critical gas infrastructure does not threaten the security of gas supply. Yet nationalising the assets could be costly and open the door to litigation.

Gazprom’s awkward attempt to sell its European unit to two little-known Russian-controlled entities has offered Berlin a way out. Gazprom failed to report the sale, the government says, allowing it to jump in and put the assets, which include large subsidiaries in Britain, Switzerland and the Czech Republic, under the management of Germany’s energy regulator until Sept. 30. While the ultimate ownership remains with Gazprom, the regulator has the right to appoint and remove managers and veto disposals.

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The pounce ensures Germany’s infrastructure security. It might also stabilize energy suppliers like Wingas, which controls 20% of the German market, and Gazprom Marketing & Trading, which supplies about a fifth of Britain’s commercial gas, by reassuring their clients that the parent is under Western control. The move also comes at no cost since Berlin has not expropriated the Gazprom assets.

But the move does not ultimately address the question of ownership. Berlin has been looking at nationalizing the Germany-based assets of Gazprom and Rosneft (ROSN.MM), Handelsblatt reported last week. This is legally possible but would require paying hefty compensation. Gazprom Germania had total assets of 8.4 billion euros and a equity of 2.2 billion euros in 2020, according to regulatory filings.

An alternative option is to find new owners for the Russian assets. That would still mean persuading investors to buy an asset formerly controlled by the Russian giant. Roping in state lender KfW might help. Either way, Gazprom’s misstep at least buys Scholz time to find a long-term fix.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

CONTEXT NEWS

– The German government seized on April 4 temporary control of Gazprom Germany, a European unit of the Russian gas major that owns gas storage facilities in Germany and controls energy suppliers in countries including the UK.

– Berlin jumped into action after Gazprom Germania tried to sell its assets to Russian-controlled entities without prior approval from the German government, thus violating German law, the German Ministry for Economic Affairs statement and Climate Action said in a. The acquiring party had also ordered the liquidation of Gazprom Germania, according to the statement.

– The German federal energy regulator will act as a trustee for Gazprom Germania until Sept. 30 and hold the voting rights of the Russian company. The ownership of Gazprom Germania remains with its Russian parent.

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Editing by Neil Unmack, Streisand Neto and Oliver Taslic

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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