Germany still trades in Russian gas

Germany continues to trade Russian gas because terminating its contract with the nationalized company could cost billions of euros and leave Berlin in a dilemma that Moscow could potentially benefit from.

According to Bloomberg, SEFE GmbH – a former affiliate of Gazprom PJSC – is supplying Russian LNG under the terms of the old contract, which was in place before the company was acquired by Germany last year. The cargo that is not subject to international sanctions is sent to India.

Nevertheless, this trade has become a problem for Germany, which has clearly indicated that it will not use gas from Russia due to the war in Ukraine. Berlin has come under heavy criticism over concerns that the state-owned company still has ties to Moscow, despite its political rhetoric.

Germany’s problems

But breaking the deal could cost German taxpayers at least 10 billion euros ($10.6 billion) – significantly more than SEFE state aid.

“Like any long-term supply agreement, this old contract also provides for very severe penalties and consequences in the event that SEFE fails to meet its contractual obligations,” said a SEFE spokesperson, declining to comment on specific terms.

The potential fine amount is a rough estimate of damages and financial penalties if Russia successfully sues the company before the International Court of Arbitration.

In October 2023, SEFE received individual consignments of LNG produced at Yamal in the Belgian port of Zeebrugge, which were to be delivered to India in November. The company does not plan to import Russian LNG to Germany or any other EU country.

However, according to Christian Gerke, a financial expert from the opposition Left party, the German government is behaving “contradictoryly”. The expert notes that the German state-owned company, on the one hand, buys, promotes and sells Russian gas. At the same time, government officials are calling for “further tightening of sanctions against Russia.”