By John O’Donnell

BERLIN (Reuters), – German officials quietly prepare for any abrupt halt in Russian gas supplies by creating an emergency package, which could include the control of crucial firms. Three people who are familiar with this matter said to Reuters.

Ministry for Economic Affairs has been leading preparations to alert the public about the availability of natural gas. This is vital for steel production, as well as plastic and car manufacturing.

Russian gas was responsible for 55% Germany’s annual imports. Berlin is under increasing pressure to end a business partnership that, critics claim, helps Russia finance its war in Ukraine.

Germany said that while it is open to cutting off Russian supply, it expects to remain heavily dependent on Moscow’s gas for the next 2024.

The officials say that Germany wants to avoid an escalation by supporting a European gas embargo. They have already supported the imposition of sanctions on Moscow for coal and oil.

They are now concerned that Russia might unilaterally cut gas flow and they want to be prepared to deal with it.

The government has a general framework in place, and is ready to assist, but the specific details on how they will execute the plan are being worked out now, officials stated.

Three officials stated that the government supports the granting of additional loans and guarantees to energy companies in an effort to help them manage rising prices. It could also take over critical companies such as refineries.

Germany’s economy minister, Robert Habeck, stated that Germany has made “intense efforts” in recent weeks reduce its Russian dependence.

Berlin approved last month a change in law to permit it to control energy companies only as an option.

According to two people, it’s now discussing the best way of putting the measure into action, including by taking over the PCK refinery in Schwedt owned by Rosneft of Russia. This refinery accounts for the majority of Germany’s Russian oil imports, and it could be subject to an EU oil embargo.

Rosneft did not comment on possible German actions.

ENERGY NATIONALISATION

One participant said nationalization of energy companies was being looked into. However, it should be balanced carefully and justified on the basis of security of energy supply rather than Russia’s punishment.

According to two sources familiar with this matter, Germany might also consider taking shares in other businesses. The German state bank KfW purchased 20% of 50Hertz’s energy network operator 50Hertz in 2018 to stop an offer from China’s State Grid.

The government’s final emergency package is still not in place. A few people warned that intervention at Schwedt’s refinery and taking minority shares in businesses were still under consideration.

KfW is also looking into how it can help relieve the pressure on crucial companies, by providing them additional loans and emergency credit lines that they might use in case of high oil prices.

KfW assisted Uniper (German energy company), EnBW’s VNG gas division and Leag coal-fired power station operator with managing volatility in the energy market earlier this year.

KfW did not comment on the companies that it had assisted.

Germany is currently evaluating how it will ration gas during an emergency. It is currently examining the possibility of giving industry priority over households. This would reverse existing policy, whereby businesses were cut off first.

This is all taking place in the context of war in Ukraine, and a more charged stand-off among Moscow and Brussels. Brussels has back tough sanctions against Russia.

Russian President Vladimir Putin stated to his military at Monday’s parade that he was fighting for Russia, but gave no indications of how long they would be fighting against Ukraine. The Kremlin describes the operation as a special military action.

ECONOMIC SPIRAL

Gazprom, Russia’s Gazprom (MCX), stopped exports of gas to Poland and Bulgaria after the recipients refused to pay in Russian roubles. The European Commission has denied accusations that Moscow used supplies for blackmail.

Gazprom as well as the Kremlin repeatedly claimed that Russia was an energy supplier reliable.

Gazprom, the Kremlin, and Gazprom didn’t immediately reply to my request for comment on reliability of supply.

Berlin is now seeking to make a decision after having backed sanctions against coal and oil. Four officials confirmed this.

They worry that gas price cuts could also cause gas prices to rocket, giving Moscow the opportunity to make money from outside of the EU while still unable to pay its war debts.

According to officials, Germany is at the end of the range of sanctions that it can impose without creating an economic spiral. All members of the coalition are committed to penalising Moscow and were wary about imposing gas sanctions.

Berlin also has been persuaded by German industry leaders, such as chief executives of Germany’s largest companies, and representatives of Russian-linked firms, one person who is familiar with the subject said.

Berlin was informed by a second source that company executives said they have been preparing to reduce Russian energy ties.