September 27, 2023

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Russia’s Gazprom exits Germany amid energy crisis

Russia's Gazprom exits Germany amid energy crisis

A model of a gasoline pump in front of the Gazprom logo in this illustration taken on March 25, 2022. REUTERS/Dado Rovich/Illustration

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LONDON (Reuters) – Russia’s Gazprom (GAZP.MM) On Friday, it said it was pulling out of its business in Germany at a time of crisis in vital energy relations between the two countries in the wake of Russia’s invasion of Ukraine.

The gas giant did not provide any details or explanation for its decision to terminate its participation in Gazprom Germania GMBH and all of its assets, which include subsidiaries in Britain, Switzerland and the Czech Republic.

Gazprom has been in the sights of EU regulators for months over allegations, which it denied, that it is holding back on gas that could have been released to lower prices. Sources this week said EU antitrust authorities had raided its offices in Germany. Read more

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“I think this means that Gazprom is opening the curtain on being an active participant in the European gas market. It is basically going home because it no longer feels welcome,” said Katya Yafimava, senior research fellow at the Oxford Institute for Energy Studies.

“I think Gazprom understands that it will face a hostile political and regulatory environment in Europe, and therefore wants to consolidate and manage all its business in one place – St. Petersburg, most likely with political support from the Russian government.”

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Yafimava said it did not expect any impact on Russian gas shipments under long-term contracts. A market source in Germany familiar with the Russian gas business agreed with that assessment.

The main impact will be on gas storage, he said, as Astora, a subsidiary of Gazprom Germania, has facilities with a total capacity of 6 billion cubic meters in Germany and Austria.

The source said it was not clear if the German government wanted to step in and authorize someone to operate these, in order to achieve the required filling levels, and whether that could spark legal opposition by Gazprom. Astora did not immediately respond to a request for comment.

The move further complicates energy relations between Russia and Germany, a day after Russian President Vladimir Putin signed a decree imposing ruble pricing on gas on buyers of what Moscow considers unfriendly.

Berlin rejects the change, as current contracts are denominated in euros, and its economy minister said on Thursday that “Putin will not blackmail it.”

Germany relies on Russian gas for about 40 percent of its needs but has joined Western sanctions against Moscow over Ukraine, including halting the Nord Stream 2 Baltic gas pipeline designed to double the flow of Russian gas directly to Germany.

German business daily Handelsblatt reported Thursday that the German Economy Ministry is considering the confiscation of Gazprom and Rosneft. (ROSN.MM) Units in the country amid concerns about the security of energy supplies. Read more

The Kremlin said on Friday that any such move would be a violation of international law.

Additional reporting by Vera Eckert and Christoph Stitz; Writing by Mark Trevelyan; Editing by William Maclean

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