Europe is burning money to help businesses worsen the energy crisis

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  • Gas prices in Europe have skyrocketed in the midst of the Ukrainian crisis
  • Utilities face a liquidity crisis
  • Germany “will do all it can” to help businesses
  • Russian mobilization raises the price of oil

BERLIN / LONDON / HELSINKI, Sept. 21 (Reuters) – Germany nationalized gas importer Uniper (UN01.DE) on Wednesday and Britain capped wholesale electricity and gas prices for businesses, while Europe spent money to keep the lights and heaters on this winter amid an escalating war in Ukraine.

Russian President Vladimir Putin added the pain of energy prices on Wednesday, driving up oil and gas prices by announcing a partial military mobilization.

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

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Russian cuts in gas supply to Europe in retaliation for Western sanctions on Moscow for the invasion of Ukraine have left public services exposed to skyrocketing spot prices as the rush for alternative supplies helped drive up consumer bills . Read more

Uniper was among the biggest corporate casualties, with Germany earmarking an additional € 8 billion in the latest step of its bailout while Britain said its new plan would cost “tens of billions of pounds”. Among the high spenders, France will allocate € 9.7 billion to take full control of the EDF utility.

“We took action to stop the collapse of businesses, protect jobs and limit inflation,” said UK Finance Minister Kwasi Kwarteng, while another government member said the final cost of his energy support will depend on the ‘price increase.

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

European gas prices on Wednesday reached € 212 per megawatt hour (MWh), below this year’s peak of around € 343, but up more than 200% from the previous year. Oil prices have risen by nearly 3%.

INCREASED RISKS

“Partial mobilization is certainly a bullish factor as it increases the risks of a prolonged war in Ukraine,” said Viktor Katona, principal analyst at Kpler. Read more

The full nationalization of Uniper follows a multi-billion dollar cash injection that proved inadequate.

The German government will buy the remaining stake in Finnish Fortum (FORTUM.HE) to give the state a 99% stake. Read more

“This is clearly not sustainable from a public finance point of view,” said Simone Tagliapietra, Bruegel’s senior fellow, of the general account of Europe’s energy crisis.

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

‘DO EVERYTHING POSSIBLE’

German Economy Minister Robert Habeck, announcing the Uniper move and other steps to help Germany avoid energy rationing this winter, said: “The state … will do all it can to keep companies stable on the market”. Read more

Nationalization gives the German government control of some assets in Russia, a government spokesperson said, adding that it was considering what to do with them.

Germany depended more than many others in Europe on Russian gas, supplied mainly via the Nord Stream 1 pipeline. Russia has cut off flows through the pipeline, blaming Western sanctions for hindering operations. European politicians call it a pretext and claim that Moscow is using energy as a weapon.

The German government has already put Gazprom Germany, a Kremlin-controlled unit of Gazprom, and a subsidiary of Russian oil company Rosneft (ROSN.MM), a de facto nationalization into trust. Adding up the Uniper bailout, the bill amounts 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 company, which is owned by the Finnish state, has lost around € 6 billion on its investment in Uniper.

Russia’s gas flows to Europe via Ukraine remained stable Wednesday, while gas flows eastbound via the Yamal-Europe pipeline to Poland from Germany were cut off. Read more

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

Moscow said it would cut all oil and gas flows to the West if such a limit were implemented.

The move by US lawmakers came just hours before Putin ordered Russia’s first mobilization since World War II, warning the West that if it continued what he called its “nuclear blackmail”, Moscow would respond with its vast arsenal. . Read more

Several countries have banned imports of Russian crude oil and fuel, but Moscow has managed to maintain its revenues through increasing crude oil sales in Asia.

($ 1 = 1.0087 euros)

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Reporting by the Reuters offices; writing by Ingrid Melander; editing by Edmund Blair and Jason Neely

Our Standards: Thomson Reuters Trust Principles.

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