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Europe burns money to help companies in energy crisis

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  • European gas prices have risen amid the Ukraine crisis
  • Utilities are facing a liquidity crisis
  • Germany will “do everything possible” to help businesses
  • Russian mobilization triggers oil price jump

BERLIN/LONDON, Sept 21 (Reuters) – Germany nationalized gas importer Uniper ( UN01.DE ) on Wednesday and Britain said it would halve energy bills for businesses in response to a deepening energy crisis that has exposed Europe’s dependence on Russian fuel.

Russian President Vladimir Putin increased pressure on energy prices by announcing a partial military mobilization, in the biggest escalation of the Ukraine war since Moscow’s February 24 invasion.

European authorities had already earmarked nearly 500 billion euros ($496 billion) in the past year to shield citizens and companies from skyrocketing gas and power prices, according to research from think tank Bruegel. read more

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Uniper has been among the biggest corporate losers, with Germany earmarking a further €8bn on Wednesday in the latest step of a €29bn rescue package.

France, also among the high spenders, will allocate 9.7 billion euros to take full control of utility EDF ( EDF.PA ).

Britain said the new plan to help businesses would cost “tens of billions of pounds”.

“We are committed to stopping businesses collapsing, protecting jobs and containing inflation,” UK Finance Minister Kwasi Kwarteng said of the tariff on wholesale electricity and gas costs for businesses, which will apply from 1 October. read more

More than 20 UK power suppliers have collapsed, many crumbling because a government price cap prevented them from passing on sky-high prices. read more

Uniper’s full nationalization would involve the German government buying out Finland’s Fortum (FORTUM.HE) to give the state a 99% stake. read more

“This is clearly not sustainable from a public finance perspective,” Bruegel senior fellow Simone Tagliapietra said of Europe’s overall energy crisis bill.

“Governments with more fiscal space will inevitably better manage the energy crisis by out-competing their neighbors for limited energy resources over the winter months.”


Announcing the Uniper move and other steps to avoid energy rationing this winter, German Economy Minister Robert Habeck said: “The state will … do everything to always keep the companies stable on the market.” read more

The Uniper nationalization gives the German government control over some assets in Russia, a government spokesman said, adding that it was examining what to do with them.

Germany was more dependent than many others in Europe on Russian gas, mostly supplied via the Nord Stream 1 pipeline. Russia halted flows through the pipeline, blaming Western sanctions for hindering operations. European politicians call it a pretext and say Moscow is using energy as a weapon.

The German government has already placed Gazprom Germania, a unit of Kremlin-controlled Gazprom, and a subsidiary of Russian oil company Rosneft ( ROSN.MM ) under trusteeship — a de facto nationalization. Including Uniper’s rescue package, the bill amounts to around 40 billion euros.


Meanwhile, a debate is raging in Europe over whether oil companies, which are making record profits due to the energy crisis, should pay extra taxes to help consumers cope with soaring inflation.

TotalEnergies ( TTEF.PA ) Chief Executive Patrick Pouyanne said on Wednesday that the French energy group would likely face more than 1 billion euros in surcharges if a proposed EU scheme to impose extra taxes on oil and gas companies was approved. read more

European gas prices on Wednesday reached 212 euros per megawatt hour (MWh), below this year’s peak of around 343 euros, but up more than 200% from a year earlier. Oil prices rose as much as 3% in early trade, but later gave up those gains.[OR}[O/R}[ELLER}[O/R}

“The partial mobilization (in Russia) is definitely a bullish factor as it increases the risk of a protracted war in Ukraine,” said Viktor Katona, lead crude oil analyst at Kpler. read more

Russia’s gas flows to Europe via Ukraine were stable on Wednesday, while eastbound gas flows via the Yamal-Europe pipeline to Poland from Germany were halted. read more

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

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

Several countries have banned the import of Russian crude oil and fuel, but Moscow has managed to maintain its income through increased sales to Asia.

The move by US lawmakers came 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

($1 = 1.0087 euros)

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Reporting by Reuters agencies; writing by Ingrid Melander; editing by Edmund Blair, Jason Neely and Jane Merriman

Our standards: Thomson Reuters Trust Principles.

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