Germany's €65B plan to ditch Russian gas
Russian energy giant Gazprom has permanently stopped gas supplies to Western Europe via Nord Stream 1, giving the reason for equipment issues. The European Commission (EC), anticipating the situation earlier this year, had already urged countries to cut their gas use by 15% from August.
Europe struggles as Russia shuts down Nord Steam 1
Germany aims to become Russian-gas-free
The country has announced an additional package of €65 billion to address the rising energy costs
This makes a total relief package of almost €100 billion
In June, Russia reduced flows through the pipeline to 40% of capacity, and then to 20% in July. This is the second time the pipeline faced a stoppage since the conflict began. Only this time, it has been shut down permanently— the outcome, which was anticipated to happen sooner or later.
Gazprom found the leak at the main gas turbine at the Portovaya compressor station, near St. Petersburg. On August 19, it was announced that the gas would be stopped from August 31 until September 2 due to routine maintenance. Siemens Energy, the turbine maker, believes otherwise and has claimed that such leaks have a modest effect on the operation of a turbine and can be sealed on site in routine maintenance.
Then came the big announcement on Friday, 2nd September. Russia announced the suspension of gas exports to Germany through Nord Stream 1 pipeline indefinitely. The West vs Russia has only escalated.
What is Germany’s reaction?
Germany is one of the countries that were heavily dependent on Russian gas. However, German Chancellor Olaf Scholz believes the country would get through the winter without Russian gas. The government has announced a package of €65 billion to ease the threat of rising energy costs. The latest package brings the total spent on relief from the energy crisis to almost €100 billion, including the previous two packages with a total of €30 billion. Until the permanent solution is accomplished, the country is dependent on the current storage levels and liquified natural gas (LNG) gases imports.
What does storage look like?
Germany was already preparing new energy-saving measures, although the timeframe was too short to be completely off the Russian gas. End of last week, the country's gas storage facilities reached the October goal of 85% despite the extended halt of the main pipeline delivering gas from Russia to Germany.
Where the fund will be spent?
The value-added tax on natural gas will be decreased from 19 % to 7 % until the end of March 2024.
Energy-intensive businesses will receive support and tax breaks to the tune of €1.7 billion.
There will be a one-off payment of €300 to all taxpayers and pensioners, via their employer, to help with rising energy costs.
People receiving child benefits will get an extra €100 per child, while people on benefits will receive a €200 one-off payment. From January 1, 2023, child benefits will increase by €18 per month for each of the first two children.
Unemployment benefits will be increased by about 50 euros per month.
Between September and December 2022, another one-off heating cost allowance will be paid out, depending upon the size of a house. For example, a one-person household will receive €415, while bigger households will receive more.
The plan to increase the national CO2 price by €5 per tonne in the transport and heating sectors will be paused until January 2024.
A ‘power price brake’ will be applied, which means households and small to medium-sized businesses would pay a discounted rate for electricity. After a certain consumption limit, prices would not be capped.
The provision of €1.5 billion per year from the federal budget to the states to support affordable public transport fares.
Other countries across Europe are considering similar measures. The EU energy ministers are due to meet on September 9 to discuss how the current burden of energy prices can be eased. The meeting's agenda include price caps for gas and emergency liquidity support for energy market participants.
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