Germany has announced that it is launching a major €200billion (£179billion) fund to tackle the spiralling wholesale cost of gas, that have skyrocketed since Russian President Vladimir Putin began manipulating gas flows to Europe. Germany, which was heavily dependent on Russian gas, accounting for 40 percent of its supply in 2021, has been significantly impacted by the reduced flows, and soaring gas prices that followed it. This new fund referred to as a “defence shield” is aimed at lowering the cost of gas, as the government making a major U-turn on its plans to impose a gas levy on households to support companies importing gas supplies.
According to German Chancellor Olaf Scholz, the “large defence shield”, will be financed by loans, and will include “a gas price brake” to reduce consumers’ energy costs.
Speaking at a press conference in Berlin today, he said that the government would do everything possible to cushion energy bills, adding: “Prices have to come down.”
He added that this defence shield would help pensioners, families, craft businesses and industry pay the cost, as families and businesses struggle to cope with rising energy bills.
Mr Scholz added that the money required to lower the energy bills would come from the Economic Stabilisation Fund (WSF), which will be filled accordingly.
Germany’s Economy Minister Rober Habeck added that the defence shield was aimed at averting an even greater crisis. Hailing the move as a significant step, he added that scrapping the gas levy would also ensure less bureaucracy.
However, he warned that German’s energy security was “still in a critical situation,” stressing that both households and businesses needed to have energy.
Meanwhile, the country’s Finance Minister Christian Lindner (FDP) stressed: “We are in an energy war for prosperity and freedom.” He warned that Germany’s energy security was now at much greater risk following the Nord Stream pipeline leak.
He warned this crisis could threaten to destroy much of what people had spent decades building, adding “we cannot accept this and will fight back,” adding that the new programme was a “crystal-clear response to Putin”.
So far, Mr Linder has not explained how the gas price brake would work, it is expected to be a financial intervention that could take place at various points: from wholesalers to gas suppliers to end consumers like households.
Europe is on high alert for a devastating attack on its infrastructure after the suspected Russian bombing of two gas pipelines. Military analysts have warned that the attack on Nord Stream 2 which caused four leaks in the huge pipeline may not be the first, detailing how the Kremlin may take further action to cripple the EU.
They have suggested Moscow could cut sub-sea data cables or even destroy another pipeline, as a British defence source suggested the “premeditated” sabotage could have been prepared by underwater drones that laid the explosives weeks beforehand.
Germany economy minister and vice-chancellor Robert Habeck commented: “We are of course in a situation in Europe and Germany where pieces of critical infrastructure, including energy supply, are potential targets.”
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Meanwhile, Mr Scholz has been scrambling to secure additional supplies of natural gas, as the threat of winter with Russia’s gas supplies grows. In particular, Germany has turned towards Gulf states, hoping to strike energy deals that would ensure the lights stay on Berlin this winter.
Last weekend, German utility RWE announced that it signed a deal with Abu Dhabi National Oil Company (ADNOC) to deliver LNG supplies to Germany by the end of December.
While the deal could signal the deepening relations between Berlin and Gulf countries, experts have pointed out that the amount of gas that Berlin is set to receive is quite small.
Aside from the shipment of LNG, the deal also includes a multi-year memorandum of understanding for delivering future supplies, which came during Mr Scholz’s two-trip trip across the Gulf countries.
This is a breaking story. More to follow.