Germany readies gas emergency law amid fears of Russian cutoff

BERLIN — The German government proposed an emergency law on Tuesday that would allow it to bail out ailing energy companies amid concerns that Russia might turn off the gas tap next week.

A reform of Germany’s energy security law would authorize Berlin to provide financial aid to energy companies or even bail them out, while also creating the possibility to introduce a special gas price levy that would share the costs of higher import prices between consumers and companies.

The cabinet on Tuesday approved the draft law, which will next be put for a vote in the German lower house, the Bundestag, on Thursday, before going to the upper house, the Bundesrat, probably on Friday — a fast-track procedure that is intended to make the new measures available as fast as possible, before parliament and upper house go into summer recess.

“It’s about doing everything we can to maintain basic supplies through the coming winter and keep energy markets running as long as we can, despite high prices and growing risks,” said Economy Minister Robert Habeck.

The reformed law comes amid warnings that Russia might use a planned routine maintenance of the Nord Stream 1 gas pipeline on July 11, which usually implies a short halt of deliveries, as a pretext to cut off gas supplies to Germany and Europe for a longer period.

Russia has already drastically reduced gas deliveries to Germany in recent weeks, which has caused serious financial distress for the country’s biggest gas importer Uniper, as it needs to buy gas at high prices on the global market to compensate for missing Russian deliveries. German consumer protection laws currently forbid Uniper from passing on most of the increased costs to end consumers, but this means that the company is now in increasing financial trouble and might even risk bankruptcy.

German Chancellor Olaf Scholz on Sunday hinted at a bailout of Uniper similar to the the €9 billion package for Lufthansa that the German government used to rescue the airline two years ago during the coronavirus pandemic.

Additional costs and compensation measures

The new law would allow the government to bail out energy firms by acquiring company shares — a measure that would theoretically also be possible without the support of the majority stakeholder.

The law further details a clause for the government to allow energy providers to bypass consumer protection laws and pass on higher gas prices directly to consumers and companies.

However, given that only some gas importers like Uniper depend strongly on Russian gas and struggle with higher prices, the law also proposes an alternative solution, a gas price levy, that would also share the higher costs among all users, in order to avoid burdening only certain categories.

Speaking at an economic forum in Berlin on Tuesday, Habeck warned that rising energy costs for German citizens and companies look unavoidable, but also vowed to counter them with further financial compensation measures. It is unclear how they could be financed, given that Finance Minister Christian Lindner has opposed further support measures that would increase Germany’s debt.

“The fear of a recession [in Germany] … is overwhelming,” said Habeck, stressing that the government should act to counter a potentially fatal combination of lowering purchasing power for consumers and an “investment brake” for companies.

Also on Tuesday, lawmakers from the ruling coalition of Social Democrats, Greens and Free Democrats agreed on a draft law to boost Germany’s transition to renewable energies which would set aside up to 2 percent of the country’s surface for wind energy turbines. The goal is to produce 80 percent of Germany’s energy demand via renewable energies by 2030.

That law also still needs to be approved by a vote in the lower and upper house.