Europe-Russia gas standoff threatens future of world's oldest glassware company

Updated on Aug 13, 2022 04:15 PM IST

Companies across Europe are preparing for the worst as governments make contingency plans for gas shortages this winter if Russian President Vladimir Putin continues cutting supplies.

Russian President Vladimir Putin at the Novo-Ogaryovo residence outside Moscow, Russia.(AP)
Russian President Vladimir Putin at the Novo-Ogaryovo residence outside Moscow, Russia.(AP)
Bloomberg |

Maximilian Riedel’s family has kept the furnaces running at their glass-making business for 11 generations. He’s worried that Europe’s gas standoff with Russia might break that legacy.

Riedel, founded in 1756, runs a three-year lead time to source specialist materials for the luxury wine glasses and decanters it produces, and furnaces used to melt glass can break if they are allowed to cool. This means that a pause in production due to energy rationing would temporarily put the company out of operation.

“I’m steaming ahead, hoping that we’re not the Titanic,” Riedel, 44, said in a Zoom interview from the company’s headquarters in the Austrian Alpine town of Kufstein. The energy crunch is making “everything uncertain and business people are very nervous,” he said.

Companies across Europe are preparing for the worst as governments make contingency plans for gas shortages this winter if Russian President Vladimir Putin continues cutting supplies. An emergency gas plan drawn up by the German government includes state control over distribution under a worst-case scenario.

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The question for companies like Riedel will be where it falls in the government’s priority list given that it’s a supplier of non-essential goods. Germany’s federal network agency, BNetzA, has been collecting data on gas usage to try to gauge which companies should get gas first if the commodity has to be rationed. Households and social services like hospitals will be given top priority, followed by heating, food and medical supplies, BNetzA Vice President Barbie Kornelia Haller told the German Economic Institute last week.

Lawmakers have used glass manufacturers as an example of why gas rationing should be enacted with caution. But that debate has mostly centered around companies like Gerresheimer AG, which produces glass used for making vaccine vials, not producers of luxury items like Riedel. A well-known name among wine makers, the company had annual turnover of 338 million euros ($349 million) in 2021.

It’s still unclear how strictly rationing policies might be applied because the German network regulator is receiving numerous requests for exemptions.

Riedel relies on Russian gas to power two factories in the southern Germany towns of Amberg and Weiden, which have capacity to produce 60 million units of machine-made glasses. It also has capacity to produce 250,000 hand-made glasses powered by electricity at its Kufstein plant.

The company’s energy bills have already jumped at least 30%, but it has been running its factories at maximum capacity to try to preempt even higher energy prices over the winter. Riedel plans to invest at least 20 million euros in the company in 2022, double what he had budgeted for the year.

“We are at the moment and at least for the next years to come dependent solely on gas,” Riedel said. “There isn’t a single energy provider who would agree a three-year or even a 12-month deal with us at the moment, so we have to buy energy day by day.”

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