After several local governments and organisations announced plans to exit Gazprom contracts in recent weeks as a show of support for Ukraine, the future of the Russian state-owned energy giant has come into question.
At the start of this month, the company was dropped as the sponsor of the UEFA Champions League, with Shell also cutting ties; CEO Ben Van Beurden stating “We cannot – and we will not – stand by” in relation to the war in Ukraine.
It was also announced that Gazprom had been sanctioned by the Government and would no longer be able to issue debt or equity in the UK. Sajid Javid, the health minister, stated earlier this month that the NHS in England must stop using Gazprom-supplied gas. Merton council in London and Suffolk county council in Suffolk have also both said that they are attempting to terminate their gas supply agreements with the corporation. However, this is already proving to be a strain as combined with rising energy prices, the switch in energy suppliers is forecast to bring big increased costs for Merton Council, with them currently seeking government support to make this move easier.
Various options have been floated out on what Gazproms next steps should be, the first being nationalising the company.
It was previously rumoured that they would be looking for a buyer in order to escape bankruptcy, however now reports claim the company’s portfolio is too large to let other suppliers bid to take over.
Nationalising Gazprom could cost taxpayers £4 billion. According to Bloomberg, if the company fails, the government will have no choice except to nationalise it. In this situation, the government would be obligated to purchase gas and electricity at current energy costs for customers, which of course would be a huge financial burden.
According to the Guardian, The government has drawn up plans to take over the funding of the UK operation for Gazprom, should the state-backed supplier collapse.
Officials have drawn up contingency plans to implement a financial lifeline for the business energy supplier, which has contracts in place with about two-thirds of the UK’s heaviest gas users, in the event that Gazprom Energy enters administration in the next few weeks.
With headquarters in London and Manchester and roughly 350 employees, the company provides 100,000 locations across the UK, Ireland, France, and the Netherlands. It accounts for around a fifth of the energy used by enterprises in the United Kingdom.