EurOil: Germany promises Czech Republic it will scrap gas levy

Germany has assured the Czech Republic that it will abolish a contentious gas transit fee either this week or in early January, Czech news agency CTK reported on December 16, citing Czech Deputy Industry Minister Stepan Hofman.

Hofman stated on the sidelines of meetings in Brussels that Germany had already moved to eliminate the fee through government action, pending approval from the Bundestag. "We were assured by Germany that the fee has already been abolished by the government and is awaiting approval in the German Bundestag, which should take place this week," he said. "If it doesn't happen this week, then it will probably happen in January, with the effect being retroactive from January 1."

Germany’s economy ministry confirmed the urgency of the measure, calling it “one of the urgent legislative proposals that we believe should be passed by the current Bundestag if possible,” referring to the upcoming snap elections on February 23. A spokesperson added that parliamentary groups were working "flat out" to finalise the process.

The gas levy was initially imposed to offset the high costs of replacing Russian gas following Moscow's sharp reduction in deliveries in 2022. German system operator Trading Hub Europe has projected the tariff will increase by 20% next year, provided it is limited to German customers only. A retroactive adjustment, restricting the levy solely to domestic consumers, is expected at the start of 2024.

Neighbouring countries including Austria and Slovakia, alongside the Czech Republic, have pushed for the levy to be abolished, arguing it inflates prices as they seek alternative gas sources amid efforts to reduce reliance on Russian supplies. Recent months have seen gas flows across the Czech-German border decline as traders pursue cheaper routes through Slovakia, where supplies remain heavily dependent on Russian gas. In Austria’s case, the levy contributed to the country relying increasingly on Russian gas this year, at times using it to cover as much as 90% of its demand.

The pressure to scrap the levy has intensified with the impending expiry of a Russian gas transit agreement via Ukraine at the end of this year. Austria, the Czech Republic, and Slovakia underscored this urgency in a joint EU paper published earlier this month. Slovakia in particular faces a shock from the potential end of Russian gas flow through Ukraine, as it relies on the route for around 60% of its gas needs.

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