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Global Economy

The Fall of Man in the German Gas Market?

It's been twenty years. But without this political decision from July 2002, Uniper would probably not exist in its current form. The largest German gas importer emerged from a highly controversial merger that was approved by the Federal Ministry of Economics twenty years ago – against many concerns.

Back then, in 2002, the electricity company E.ON wanted to take over Germany's largest gas supplier, Ruhrgas. The Bundeskartellamt saw considerable disadvantages for competition and rejected the project. The Monopolies Commission, which advises the federal government, also expressed massive concerns in a statement. But the then red-green federal government under Chancellor Gerhard Schröder ignored this and allowed the merger – in the form of a so-called ministerial approval.

"Lobbying and Outright Misconduct"

The then non-party Economics Minister Werner Müller had previously worked for one of the predecessor companies of the energy group Veba, which later merged into E.ON. He declared himself biased and therefore left it to his State Secretary Alfred Tacke to grant permission for the merger of the two energy giants.

From the point of view of Jürgen Kühling, the current chairman of the Monopolies Commission, several serious problems came together with this decision: "On the one hand lobbying and on the other hand a complete misunderstanding: People believed that if we got the really big German gas supplier, everything would be fine better." The opposite was the case: "A monopolist emerged, which subsequently also made itself dependent on Russian companies."

Even then there was criticism

Not only did the story have a "flavour": The people involved in the ministry, Müller and Tacke, changed not too long after the controversial decision to management positions in the group of companies whose merger they had made possible.

The FDP leader at the time, Guido Westerwelle, spoke of a scandal, and Werner Schulz from the Greens, who were in the government at the time, also criticized: "Despite all the personal esteem in which ex-minister Werner Müller and state secretary Alfred Tacke feel, their move to this Division certainly did not help to reduce suspicion about a highly controversial decision."

Competition suffered from the decision

But the main problem was the economic consequences. Kühling, who teaches law at the University of Regensburg, goes so far as to say: "I think the whole disaster – the undesirable development on the gas market – started with this ministerial approval for E.ON and Ruhrgas."

It was not only the competition that was damaged as a result. There were no investments in alternatives to Russian gas. Ruhrgas even brought a license for a liquid gas terminal in Wilhelmshaven into the joint venture – but E.ON surrendered this license in 2009 unused. Instead, the joint venture became increasingly involved in Russia, through new supply contracts and participation in Siberian gas fields, in Nord Stream 1 and later in Nord Stream 2.

The stronger ties to Russia were not an accident, but planned – and wanted by politicians. For example, State Secretary Tacke explicitly stated in the approval for the merger that this would allow the company to invest more in a gas supplier like Gazprom.

Uniper is majority owned by a Finnish group

The then chairman of the Monopolies Commission, Martin Hellwig, is still outraged today. It is a company's right to only do what is privately profitable: "But then it shouldn't pretend that it serves the public interest." And politicians also have a responsibility: the federal government, which argued with the ministerial approval with security of supply, should not have shirked its responsibility for a public interest concern such as this security of supply.

In 2016, E.ON's gas business was spun off. This is how the energy company Uniper came into being, a majority of which was taken over by the Finnish Fortum Group. Now Uniper is trying to build liquefied gas terminals at lightning speed – so that Germany can get out of its fatal dependence on Russian gas. A different decision twenty years ago might have helped prevent this dependency from arising in the first place.

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