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ENERGY

Germany, Russia to launch Nord Stream

The leaders of Germany and Russia will inaugurate the controversial Nord Stream pipeline pumping Russian gas to Western Europe on Tuesday, highlighting its strategic importance to both sides.

Germany, Russia to launch Nord Stream
Photo: DPA

Angela Merkel and Dmitry Medvedev will headline a guest list including the prime ministers of France and the Netherlands, Francois Fillon and Mark Rutte, and EU energy commissioner Günther Oettinger to mark the first of controversial gas links under the Baltic Sea.

The ceremony in the northeastern German town of Lubmin will celebrate the arrival of the first Russian gas through the 1,224-kilometre-long (761 miles) pipeline into the European grid.

Once operational in late 2012, it will transport 55 billion cubic metres (1.9 trillion cubic feet) of gas a year to the EU for at least half a century, enough to supply around 26 million homes, Nord Stream says.

The consortium for the €7.4 billion ($10.2 billion) project is a joint venture between the Russian state-held gas giant Gazprom, German firms BASF and EON, Dutch company Gasunie and GDF Suez of France.

Russia loaded the first gas into the link in September and aims to use it to reduce its dependence on Ukraine and other transit nations where there have been pricing disputes that have in some cases disrupted delivery to Europe.

However, the project has been hotly contested since then Russian president Vladimir Putin and former German chancellor Gerhard Schröder presided over the signing in 2005. Schröder is now chairman of Nord Stream’s supervisory board.

Poland and the Baltic states have long voiced fears over the project, which bypasses their territory, arguing they will be on their own when bargaining with Russia for their own gas supplies.

Sweden has raised ecological objections to the massive seabed pipeline, which Gazprom has brushed aside.

“There had been concerns among some but good sense prevailed,” Russia’s ambassador to Germany, Vladimir Grinin, told AFP.

“Germany’s recent decision to abandon nuclear energy, which means that it will have a bigger need for gas in the medium-term, has led many to see more clearly.”

Germany this year decided to shut down all of its nuclear power plants by the end of 2022 in reaction to the disaster in March at Japan’s Fukushima facility.

Critics say the Kremlin uses Russia’s bountiful energy supplies as a strategic weapon to assert its political dominance.

Nord Stream is becoming operational just as the EU re-assesses its own reliance on Russia – currently supplier of more than a quarter of Europe’s gas – as its primary energy source.

A Nord Stream spokesman insisted Europe had nothing to fear. “That share (about 25 percent) will not change significantly when this is up and running because consumption is rising at the same time. We may reach around 30 percent,” said Jens D. Müller.

An energy expert at Germany’s DIW economic institute, Claudia Kemfert, said it would nevertheless be “wise for the West to diversify.”

“There is a gas surplus in the world – why fixate on Russia?” she asked, noting the market role to be played by liquefied natural gas.

However, the debate has been coloured by Gazprom’s mounting influence, particularly in Germany, where it owns a first-division football club and is in talks with RWE about intensifying cooperation.

RWE is involved in a competing pipeline project to Nord Stream – Nabucco – which is backed by the European Union and the United States. The route it would take, from the Caspian Sea via Turkey and eastern Europe, bypasses both Russia and Ukraine.

“The Nabucco project is already running into trouble, and closer ties between RWE and Gazprom would further decrease its chances,” Kemfert said.

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ENERGY

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.

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