BASF boosts Russian gas pipeline

Russia's bid to build a rival to a US-backed gas pipeline to Europe received a major boost this week when the project was joined by the hydrocarbon subsidiary of the German powerhouse BASF.

BASF boosts Russian gas pipeline
Photo: DPA

Wintershall’s preliminary agreement to acquire a 15 percent stake in South Stream for about €2 billion provides the vital stamp of approval that Russia’s Gazprom gas giant needed from the European Union’s biggest economy.

The Gazprom-led project will be formally joined later this year by the French electricity group EDF and already includes Italy’s ENI as a founding partner.

“This is a tremendously important agreement considering the processes occurring today on the international energy markets,” Russia’s Prime Minister Vladimir Putin said moments after the framework agreement was signed on Monday.

“This is a sign of stability,” the country’s de facto leader added before thanking German Chancellor Angela Merkel for personally backing the project.

The deal delivers a double blow to the US-backed Nabucco pipeline: Germany will provide Gazprom with the required market and is likely to fan European doubts about the viability of their own expensive and risky project.

“This means that the South Stream project has been decided and Gazprom will remain a supplier of gas to Europe for many decades to come,” Gazprom chief Alexei Miller told reporters.

“Gazprom has the markets and most importantly, Gazprom has the volumes” of natural gas required, he said.

The announcement marks a profound reversal of fortune for South Stream.

The $21.5 billion project – its first gas not expected to flow under the Black Sea until year-end 2015 – seemed in serious peril last week when it failed to receive the required blessing from the Black Sea power Turkey.

One Russian official even suggested cancelling the underwater section of the pipeline and transporting liquefied natural gas by ship instead.

But such plans were firmly dismissed by both BASF executives and Gazprom’s Miller at the festive signing ceremony.

“Liquefied natural gas can only be viewed as an additional option,” Miller said.

The deal also represents the latest stage of burgeoning energy ties between Germany and a country that has been criticised by the United States for using pipelines as a strategic weapon.

Wintershall is already a partner in Gazprom’s Nord Stream project that runs directly to Germany under the Baltic Sea.

Both the South and Nord Stream pipelines avoid running through Ukraine – a country with which Russia has had bitter energy disputes – and also bypass Poland to the country’s dismay and frustration.

Other nations have expressed fear that Germany was only pandering to Gazprom’s strategy of dividing Europe by striking gas agreements with specific countries to the detriment of the EU as a whole.

But BASF chief executive Jürgen Hambrecht said his only concern was getting the final agreement decided by the end of the year.

“I am very glad to have the opportunity to sign the documents on this project, this is only the start, this is only a memorandum of understanding,” he said.

“Now we have to work hard and fast to sign a corresponding detailed agreement, but we always work hard.”

Monday’s memorandum of understanding will see Gazprom keep its 50 percent stake in South Stream.

Italy’s ENI held the other half until it agreed to cede 10 percent to the French company EDF in a deal that is due to be formalised later this year.

Both BASF and Russian officials said that Wintershall’s 15 percent stake will come from the shares held by Gazprom’s French and Italian partners.

The precise breakdown is not expected to be announced until later this year.


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German government announces fresh relief package for high energy costs

With Russia's invasion in Ukraine exacerbating high energy and petrol prices, Germany is set to introduce a second relief package to limit the impact on consumers.

German government announces fresh relief package for high energy costs

The additional package of measures was announced by Economy and Climate Protection Minister Robert Habeck (Greens) on Sunday.

Speaking to DPA, Habeck said the wave of price increases throughout the energy sector were becoming increasingly difficult for households to bear.

“Extremely high heating costs, extremely high electricity prices, and extremely high fuel prices are putting a strain on households, and the lower the income, the more so,” he said. “The German government will therefore launch another relief package.”

The costs of heating and electricity have hit record highs in the past few months due to post-pandemic supply issues. 

This dramatic rise in prices has already prompted the government to introduce a range of measures to ease the burden on households, including abolishing the Renewable Energy Act (EEG) levy earlier than planned, offering grants to low-income households and increasing the commuter allowance. 

READ ALSO: EXPLAINED: What Germany’s relief package against rising prices means for you

But since Russia invaded neighbouring Ukraine on February 24th, the attack has been driving up energy prices further, Habeck explained.

He added that fears of supply shortages and speculation on the market were currently making the situation worse. 

How will the package work?

When defining the new relief measures, the Economics Ministry will use three criteria, Habeck revealed. 

Firstly, the measures must span all areas of the energy market, including heating costs, electricity and mobility. 

Heating is the area where households are under the most pressure. The ministry estimates that the gas bill for an average family in an unrenovated one-family house will rise by about €2,000 this year. 

Secondly, the package should include measures to help save energy, such as reducing car emissions or replacing gas heating systems.

Thirdly, market-based incentives should be used to ensure that people who use less energy also have lower costs. 

“The government will now put together the entire package quickly and constructively in a working process,” said Habeck.

Fuel subsidy

The three-point plan outlined by the Green Party politician are not the only relief proposals being considered by the government.

According to reports in German daily Bild, Finance Minister Christian Lindner (FPD) is allegedly considering introducing a state fuel subsidy for car drivers.

The amount of the subsidy – which hasn’t yet been defined – would be deducted from a driver’s bill when paying at the petrol station. 

The operator of the petrol station would then have to submit the receipts to the tax authorities later in order to claim the money back. 

Since the start of the war in Ukraine, fuel prices have risen dramatically in Germany: diesel has gone up by around 66 cents per litre, while a litre of E10 has gone up by around 45 cents.

READ ALSO: EXPLAINED: The everyday products getting more expensive in Germany

As well as support for consumers, the government is currently working on a credit assistance programme to assist German companies that have been hit hard by the EU sanctions against Russia.

As reported by Bild on Saturday, bridging aid is also being discussed for companies that can no longer manage the sharp rise in raw material prices.

In addition, an extension of the shorter working hours (Kurzarbeit) scheme beyond June 30th is allegedly being examined, as well as a further increase in the commuter allowance.