Sweden and Finland intervene to protect electricity providers from a Lehman-like crisis

After Russia’s Gazprom shut down the Nord Stream 1 gas pipeline, worsening Europe’s energy crisis, Finland and Sweden on Sunday announced plans to grant billions of euros in liquidity guarantees to power businesses in their nations. Sweden intends to provide 250 billion Swedish crowns ($23.2 billion) in liquidity guarantees, while Finland aims to provide 10 billion euros ($9. 95 billion).

Finnish Economic Affairs Minister Mika Lintila stated on Sunday that “this has got the makings for a type of Lehman Brothers of the energy business.” The company tweeted, “We appreciate the governments of Finland and Sweden taking swift action to stabilize the Nordic derivatives market and support Nordic energy companies in times of crisis.

According to the governments, the assurances are meant to avoid soaring collateral requirements from bringing down energy businesses that sell power on the Nasdaq Commodities exchange, a situation that may then extend to the banking sector. Due to the jump in electricity costs, which have increased by over 1,100%, the collateral required for Nasdaq clearance recently increased to 180 billion Swedish crowns from about 25 billion in normal circumstances, according to information released on Saturday by Sweden’s debt office.