Analysis: Fearing a Russian cut, German industry is preparing for the race for petrol rations


A model of the pipeline is seen in front of the colors of the German and Russian flags displayed in this illustration taken April 26, 2022. REUTERS/Dado Ruvic/Illustration

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  • The BDI lobby will present its plan to the government in early June
  • A split emerges between big and small companies
  • Auctions could be modeled on those of the exit from coal

FRANKFURT, May 20 (Reuters) – Big German companies are drawing up a plan to use an auction system to help ration available supplies in case Russia cuts its gas, although some fear it could punish smaller companies.

Discussions over possible rationing have become urgent after Russia cut off gas supplies to Bulgaria and Poland last month.

That heightened fears that the same could happen in Germany, which relies heavily on Russian gas and is approaching a deadline this month to pay for fuel under a ruble scheme demanded by Moscow.

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Adding to the jitters, Finnish state energy supplier Gasum said Russia could cut off gas supplies this week as Helsinki ends decades of neutrality by seeking membership of the Treaty Organization of the North Atlantic, whose enlargement Moscow opposes.

An action plan prepared by the German Bundesnetzagentur (BNetzA), which would be in charge of rationing in the event of a gas supply emergency, explores which companies should be given priority.

“Depending on the severity of the shortages…it may be necessary…to cut gas supplies to zero for some users,” he said this week.

Regulators, he said, could delay gas cuts for industry if the agency determines a company is playing an “exceptional role”, although that remains to be clearly defined.

BNetzA President Klaus Mueller said several criteria would be considered when determining gas rationing for industry, including company size, industry relevance and potential economic loss.

German industry is particularly concerned about energy-intensive factories, such as glass, steel, food or drug manufacturing, as well as the chemical sector, which provide many building blocks for the industry.

Some in the industry say the regulator will struggle to draw up a cohesive rationing list because manufacturing supply chains are intertwined and the ripple effects difficult to predict.

HIGHER PAIN THRESHOLDS

In an attempt to control the situation, proposals from the Federation of German Industries (BDI), which will be presented to the German network regulator in early June, support the idea of ​​an auction-type system.

The state would reimburse companies if they cut gas consumption by shutting down production temporarily or in the longer term, leaving more to critical sectors, said an industry source familiar with the matter, who asked not to be named.

Another source said this model would seek to distribute gas based on price. Details were still being worked out.

German small and medium-sized businesses, under the aegis of the “mittelstand” pressure group BVMW, are however alarmed at the idea of ​​using the system to deal with gas rationing.

“Auctioning gas rights is not fair,” said Hans-Juergen Voelz, the group’s chief economist, saying such a system could lead to the closure of medium-sized companies.

“large financially strong enterprises have a much higher pain threshold in such auctions than a mittelstand enterprise.”

Network regulator chief Mueller said last week that auctions for gas rationing could make sense.

Already Germany has such a system to try to wean the country off coal.

Utilities are bidding for the compensation they will get in exchange for shutting down coal-fired power plants.

Companies willing to accept the lowest price in exchange for shutting down qualify for state aid, leaving larger power plants, with more stakes, operational.

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Additional reporting by Matthias Inverardi; edited by Barbara Lewis

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