On 4 April 2022, the German government announced that it had placed Gazprom Germania GmbH under a temporary trusteeship. Germany's federal energy regulator, Bundesnetzagentur, will serve as the temporary trustee of the German entity of the Russian Government majority-owned Gazprom until 30 September 2022. This nationalization will temporarily grant the German government ownership of the entities, although initial indications show the day-to-day operations should remain relatively uninterrupted.
Reasons for Temporary Nationalization
Gazprom Germania GmbH is a pivotal piece of Germany's energy infrastructure. Its subsidiary Astora GmbH alone is responsible for approximately 25 percent of Germany's natural gas storage, and other subsidiaries play important roles in the country's natural gas transportation and energy commodities trade. Therefore, any sale of Gazprom Germania GmbH would have drastic repercussions due to the entanglement with the German energy market.
This explains Germany's decision to act directly following Gazprom Group's 1 April announcement that it would no longer have any stake in Gazprom Germania GmbH. Gazprom attempted to transfer control to two relatively unknown entities: JSC Palmary and Gazprom Export Business Services LLC. The German Minister of Economy alleges that this transfer violated German law both due to the absence of details on the buyers – any sale of critical infrastructure outside the European Union would have required approval from the Ministry of Economy – and because the buyers ordered the liquidation of the entity before approval.
An interesting side effect of Germany seizing control of Gazprom Germania GmbH is that Germany, by extension, now controls several of the entity's subsidiaries across Europe. Some examples include the London-based Gazprom Marketing & Trading and its subsidiary the electricity and natural gas supplier Gazprom Energy, along with other trading entities Gazprom Schweiz AG and Vemex S.R.O, based in Switzerland and the Czech Republic, respectively. While temporary German ownership shelters Gazprom Germania GmbH's European subsidiaries from any future supply disruptions associated with Gazprom Group, it raises questions.
- The first is to what extent this change in ownership will encourage additional business while these local companies still bare the Gazprom name. While companies such as Gazprom Energy publicly proclaim that new ownership should restore market faith, the increase in business should be moderate at best. Businesses across Europe are still hesitant to sign contracts with Gazprom and following the trusteeship, any long-term contract signed with these entities may revert to Gazprom Group.
- A second question is to what extent the United Kingdom will need to get involved with Gazprom Energy, which provides electricity to approximately 20% of the country's industrial and commercial customers. While the German nationalization does remove Gazprom PLSC's control of infrastructure, it is unclear to what extent Germany will act should Gazprom Energy experience economic hardships. From a purely legal perspective, it would appear Germany as the owner, would be responsible to keep the company afloat. However, how practical is it to expect German taxpayers to fund keeping the lights on in the United Kingdom (particularly with the still fresh wound of Brexit)? We believe it is far more likely that should the situation arise, Germany would threaten to let Gazprom Energy go out of business and force the United Kingdom to foot the bill themselves or lose a critical energy supplier. This possibility may cause the United Kingdom to pre-emptively take action, which may include nationalizing the entities within its borders.
- Another consideration is the effect this will have on the operations of Gazprom Germania GmbH and its subsidiaries. While the German government now serves as the de-facto owner, there are varying reports on the role it will play within the organizations. While this should not drastically affect the day-to-day operations, it is unclear how much operational control Germany will exert and how much managerial turnover will follow.
- One final question for the moment is what happens after 30 September 2022 when the trusteeship expires? Gazprom Group has already indicated that they wish to move their German entity, and while the initial transfer has been blocked, the possibility remains that another transfer attempt will follow when Gazprom regains control. Will Germany continue to block a change in control or take a more drastic measure such as permanently purchasing or nationalizing Gazprom Germania GmbH? Regardless of the outcome, any new owner will control an integral piece of the energy supply chain throughout Europe.
NUS will continue to monitor the evolving situation throughout Europe and provide updates as more information becomes available.
More: Research Notes, Gazprom