Russia’s alarming hold over German energy infrastructure

The war in Ukraine has exposed not only Germany's dependence on Russian gas, but also the large share of Russian capital in the country's oil refineries, pipelines and other gas infrastructure.

Russia's alarming hold over German energy infrastructure
The facilities at the gas receiving station for the Nord Stream 2 Baltic Sea pipeline. Photo: picture alliance/dpa | Stefan Sauer

The German subsidiaries of Russian giants Gazprom and Rosneft are key players in the energy landscape of Europe’s biggest economy.

Energy deals with Russia were long seen as part of a German policy of keeping the peace through cooperation with Russian President Vladimir Putin’s regime, but that approach now lies in “ruins”, according to Der Spiegel magazine.

German politicians now “have to face the fact that they have not brought on board agents of change within Russia, but possibly also Trojan horses of the  Kremlin”, the magazine said.

READ ALSO: ANALYSIS: How quickly can Germany wean itself off Russian gas?

Gas storage

In early April, the German government took the unprecedented step of temporarily taking control of Gazprom’s German subsidiary, after an opaque transfer of ownership of the company sent alarm bells ringing in Berlin.

Economy Minister Robert Habeck justified the radical move by saying it served “public order and national security”.

Gazprom’s Rehden gas storage facility in Lower Saxony state alone accounts for around 20 percent of Germany’s total gas storage capacity.

The Rehden facility was owned by the German group BASF until 2015, when it was sold to Astora, a subsidiary of Gazprom.

It has a capacity of four billion cubic metres and bills itself as the largest gas storage facility in Europe. However, its tanks are currently only 0.5 percent full, with Gazprom suspected of having deliberately kept levels low ahead of Russia’s invasion of Ukraine.

READ ALSO: Germany slashes Russian energy imports

Astora has additional storage facilities in Jemgum, on the border with the Netherlands, and in Haidach, Austria. Gazprom Germania also has a stake in a large salt cavern storage facility near Hamburg.

Distribution networks

Gascade, one of the largest gas distribution network operators in Germany, is 50.03-percent owned by Gazprom Germania.

The company describes its network of 3,200 kilometres (2,000 miles) of pipelines delivering gas to cities across the whole of Germany as “the hub of European natural gas transport”.

On its website, Gascade says its “transport business is not subject to the influence of the Gazprom Group or any other shareholder”.

Other important pieces of the puzzle, such as the North European NEL pipeline and the Baltic Sea OPAL pipeline, are owned by the company Wiga Transport, which in turn is 49.98-percent owned by Gazprom Germania.

The remaining stakes in Gascade and Wiga Transport are held by the German Wintershall Dea Group – which is one-third owned by Russian oligarch Mikhail Fridman, a target of recent Western sanctions.

Wingas, another company wholly owned by Gazprom Germania, also has a market share of around 20 percent and plays a crucial role in the distribution of gas to German municipal utilities, industrial companies and power plants.

Gazprom Germania is due to stay under state control until September 30, by which time the government must decide between nationalisation or sale to a new owner.

Oil refineries

The German subsidiary of Rosneft claims to account for a quarter of all German crude oil imports and has a majority stake the PCK refinery in Schwedt, northeast of Berlin.

The PCK refinery can process about 11.6 million tonnes of crude oil per year, which amounts to about 11 percent of Germany’s total oil consumption.

In late 2021, Rosneft announced plans to increase its stake in the PCK refinery from 54 to 92 percent by buying shares from Dutch-Anglo group Shell.

Germany’s Federal Cartel Office approved the transaction a few days before the outbreak of the war but the Economy Ministry is examining whether it can still be stopped.

READ ALSO: EXPLAINED: How Germany could end its dependence on Russian energy

Rosneft Germany also holds 24 and almost 29 percent stakes in the two large Miro and Bayernoil refineries in southern Germany.

Like Gazprom for the gas sector, Rosneft is a major distributor in the oil sector, supplying 4,000 major customers in Germany, according to the Handelsblatt daily.

By Sophie Makris

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Is now a good time to switch energy providers in Germany?

The market prices for electricity and gas in Germany are cheaper now than they have been for a long time, leading some consumer advisors to recommend customers shop around for lower tariffs.

Is now a good time to switch energy providers in Germany?

Why are energy prices going down? 

Last year, energy prices in Germany rose to record heights following the Russian invasion of Ukraine. But now, partly thanks to a milder winter than initially feared, market prices for gas and electricity have taken a downturn.

READ ALSO: ‘Over half’ of Germans heating homes less or not at all

So far, however, most consumers are yet to benefit from the lower prices, as they are still being supplied with the electricity and gas that suppliers bought at higher prices last year.

This is particularly the case with the so-called basic suppliers (Grundversorger) – the companies that supply most customers in a region (such as Vattenfall or GASAG) – as they tend to buy electricity and gas on a long-term basis, in some cases years in advance. 

Last year, this meant that the basic suppliers could still offer the lower prices of the past, but gradually, they have had to raise their tariffs. 

“As a result, they now have some catching up to do and are passing on the high procurement prices to customers,” Christina Wallraf, an energy expert at the consumer advice centre in North Rhine-Westphalia explained.

Who is offering low prices?

Gas and electricity prices from so-called alternative suppliers – energy companies other than the basic suppliers – are now falling across the board.

This is because such suppliers have a short-term procurement strategy, which means they can “pass on favourable market prices more quickly than the basic suppliers buy for longer periods”, Hans Weinreuter from the Rhineland-Palatinate consumer centre explained.

For new customers – energy shoppers who join a new provider – prices are considerably cheaper than they were a few months ago. 

A green plug in front of an electricity bill. Photo: picture alliance / Jens Kalaene/dpa-Zentralbild/dpa | Jens Kalaene

The current average price of a kilowatt hour of gas for new customers is currently around 14.3 cents – 64 percent less than the average at the beginning of September last year when it reached a peak of around 40 cents. 

Electricity prices for new customers have also dropped by around 24 percent since mid-October, when a kilowatt hour of electricity for new customers still cost an average of 56 cents, whereas the current price is 42.7 cents.

For basic suppliers, the prices have moved in the opposite direction. Since the beginning of September, basic gas supply prices rose on average from 12.7 to 17.7 cents per kWh, while the price of basic electricity supply rose by 27 percent – from 36.8 to 46.6 cents per kWh since mid-October.

When does it make sense to switch?

Numerous consumer advisors recommend those who are currently stuck in very expensive tariffs to look around for alternatives.

“That’s where a look at possible alternatives makes sense,” says Hans Weinreuter from the Rhineland-Palatinate Consumer Center.

Udo Sieverding, an energy expert at the consumer advice centre in North Rhine-Westphalia, told the Berliner Taggespiegel: “Anyone who wants to switch now has a good chance of finding a cheaper tariff.”

He added that there is no rush, however, and said that he considers “the risk of prices at discounters going up again in the next few months to be low”.

A man turns up the thermostat on a radiator.

A man turns up the thermostat on a radiator. Photo: picture alliance/dpa | Hauke-Christian Dittrich

However, Julia Schröder, an energy law expert at the Lower Saxony consumer advice centre, recommended that consumers should not take the decision to switch suppliers lightly, as this usually means being bound to a new provider for one or two years when “nobody can foresee” how prices will develop over the next 24 months. A change would therefore be worth it only if it resulted in substantial savings, she advised. 

However, Ingbert Liebing, CEO of the Association of Municipal Enterprises (VKU), recently criticised the appeals of experts to consumers to switch from basic suppliers to discounters with cheap tariffs.

READ ALSO: Energy prices could double long-term in Germany, utilities companies warn

“It was foreseeable that now again soldiers of fortune would enter the energy market and think they can make a quick deal, at the expense of the municipal utilities and basic suppliers,” he said of the lower tariffs currently on offer by alternative providers. 

He warned against cheap tariffs that lure customers in with low prices for a short period of time and then raise them again in a matter of months. 

Can I switch from a basic to a discount provider?

Theoretically, switching from a basic to an alternative energy provider should be straightforward. Unlike those in contracts with special tariffs, customers of basic suppliers generally have the legal right to cancel at any time with two weeks’ notice and look for another supplier.

READ ALSO: EXPLAINED: How to change electricity and gas providers in Germany

Those who are not with a basic supplier should look at their documents and check for how long their current gas supply contract is still valid. If there is a supplier with more favourable conditions, it may be worthwhile to terminate the contract. 

Oncoming price brakes

Another thing to bear in mind when considering whether to switch energy suppliers is the oncoming price brakes for gas and electricity. 

READ ALSO: 7 reasons to be optimistic about life in Germany in 2023

In the case of electricity, 80 percent of consumption will be capped at 40 cents per kilowatt hour from March, backdated to January. The same applies to gas: from March, backdated to January, natural gas customers will receive a state-guaranteed price of twelve cents per kilowatt hour for 80 percent of their previous annual consumption.

A person holds a wallet with cash.

A person holds a wallet with cash. Photo: picture alliance/dpa | Lino Mirgeler

Despite the price brakes, it can still be worth switching if the contractually agreed energy price with your current supplier is over 40 cents per kilowatt hour for electricity and over twelve cents per kilowatt hour for gas.

That’s largely because the price brakes for electricity and gas are currently limited to just one year.

“If the price brakes are not extended, every kilowatt hour consumed will cost the regular contract price again next year. This is another reason why it will be important for consumers to choose the cheapest possible tariff this year,” said Thorsten Storck from Verivox.