Lessons – Germany Saw Huge Profits from Cheap Russian Fuel!

Germany has created two big national mistakes that it is trying to fob off on other countries.

The first mistake was that German business has profited handsomely from cheap and unlimited supplies of cheap fossil fuels from Russia. Their fossil fuel agreements with Russia have been so good that there was no incentive to diversify because all other sources of energy were more expensive compared with the low costs of Russian fossil fuels. 

Such reliance on Russian energy was known to be a highly risky since it is based on a a few suppliers all controlled by Putin, but this fact was totally ignored by German industry and their politicians. All agreements were put in place by the political leadership of both countries – Putin and Merkel with the support of the German energy business lobby.

That was not the case in Finland, Sweden or Norway – all near neighbours to Russia. The Nordics understood the risks and weaned themselves off too much reliance on Russian fossil fuels.

The Germans were able to build huge energy intensive manufacturing plants from vehicles to heavy investment goods with these cheap fossil fuels. This cost advantage gave them great dominance in the global export markets for the over four decades.

These unlimited benefits have meant that Germany have never had to diversify their sources of energy – in fact they even have done exactly the opposite by deciding to close down their nuclear power plants after the 2011 Fukushima episode!

Many independent experts saw then in 2017-19 that these investments in Russian fossil fuels were highly risky and totally inappropriate for a company like Fortum. This newspaper was extremely vocal about this matter at the time. The risk of such huge losses cannot now be a sudden surprise except by an incompetent media, management and owners. 

The second major mistake was that consumers were sold gas at what could be regarded as fixed prices for heating and cooking. This too is a political decision aimed at pleased the electorate. Germany it appears is unwilling to change this practice even though huge losses are being borne by the wholesalers. The reason we have limited liability for companies is to stop companies from taking unlimited losses – bankruptcy comes quickly if there are such losses… but not in Germany it seems!

This is not the case in the Nordics we pay the market price for such heat and energy albeit mostly based on spot prices or annual or two year fixed price contracts. Now that Gazprom has reduced the supply of gas consumers continue to pay a fraction of market prices causing wholesale suppliers huge losses. Normally suppliers would go bankrupt but not in dear old Germany where the shareholders of the wholesale suppliers are being asked to cover the losses…

After the massive profits earned by Germany from decades of cheap fossil fuels from Russia it is time for them to admit to their errors and stop these ridiculous policies.

Fortum Plc, the main owner of Uniper, one of the largest wholesalers of Russian fossil fuels, were negligent or reckless when investing in Uniper in 2017. Fortum is majority owned by the Finnish government.

The then right-wing led Finnish government openly supported this merger as proposed by the board and management of Fortum.

They were all responsible, and remain so, for such huge losses from such rash decisions. The present government led by the Social Democrats is in an impossible position to try to solve this major losses caused by the present opposition parties!

Germany must be made to pay up for the losses caused by their deliberate foolishness.

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