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Said it and did it: Gazprom, Russia’s state-owned energy giant, has finally cut gas supplies to Austria‘s primary energy provider OMV.
The development comes in the wake of an arbitration ruling in favor of OMV over Gazprom’s failure to meet delivery commitments to its German subsidiary. On Friday, Austria confirmed it had received notification from Russian authorities that natural gas would stop flowing from Saturday 16 November.
OMV, Austria’s largest energy supplier, is trying to recover 230 million euros in damages from Gazprom following a recent arbitration ruling.
Austria’s energy regulator, E-Control, said Gazprom’s deliveries to OMV stopped at 6:00 a.m. local time (7:00 a.m. Kyiv time) on Saturday, as the Russian company had warned. However, E-Control assured Austrian consumers that gas prices and supplies within the country would remain stable despite the disruption of Russian deliveries.
Natural gas through Ukraine
In response, Gazprom said it would ship 42.4 million cubic meters of natural gas to Europe via Ukraine on Saturday, in line with Friday’s levels. Supply flows to Slovakia from Ukraine held steady, but volumes set for Austria were about 16% lower than average for the month, according to Eustream, Slovakia’s natural gas carrier.
OMV’s usual intake includes about 40% of Russian natural gas passing through Ukraine, equivalent to about 17 million cubic meters per day. Austria and other European countries have long relied on this route through the Soviet-era pipeline, the Urengoy-Pomary-Uzhhorod line, which supplies gas from northern Siberia through Ukraine to European markets.
The closing
This route, however, faces imminent closure. Kiev has said it does not intend to extend its existing five-year transit contract with Moscow, which expires at the end of the year. Consequently, significant volumes of Russian natural gas will be supplied to Hungary and Slovakia only if Austria is removed as a transit destination. Hungary currently receives Russian gas through a pipeline system routed primarily through Turkey.
Russia’s natural gas exports to Europe via Ukraine amounted to about 15 billion cubic meters in 2023, representing about 8% of Gazprom’s peak volumes transported to Europe in 2018-2019. According to the International Energy Agency, the Ukrainian transit route covered about 65% of gas demand for Austria and neighboring countries Hungary and Slovakia in 2023.
“Energy blackmail” with natural gas at the forefront
European Commission President Ursula von der Leyen on Saturday accused Russia of using energy supplies as a form of “blackmail” against Austria and the EU.
Responding to Gazprom’s decision to halt gas deliveries to Austria, von der Leyen claimed to X that Russian President Vladimir Putin is “tooling” energy to pressure Europe.
Once again Putin is using energy as a weapon.
He is trying to blackmail Austria & Europe by cutting gas supplies.
We are prepared for this and ready for the winter. Gas storage across the EU is full.
As I told @karlnehammer yesterday Europe stands united in supporting Austria
— Ursula von der Leyen (@vonderleyen) November 16, 2024
However, the head of the Commission assured that the EU is prepared for such actions, stressing that natural gas storage facilities throughout the bloc are full and Europe is ready for winter.
Von der Leyen also reiterated the EU’s solidarity with Austria, highlighting her recent discussions with Austrian Chancellor Karl Neuhammer on the issue.
On Friday, Neuhammer confirmed that Gazprom, Russia’s state-controlled natural gas company, would stop gas supplies to Austria from Saturday.
Natural gas through Ukraine
Both Austria and Slovakia continue to receive Russian gas via Ukraine under a transit agreement that expires at the end of the year. It is one of two remaining routes supplying Europe with Russian natural gas and accounts for around 5% of the EU’s annual gas imports.
Analysts have warned that volumes passing through the Ukraine transit route could almost halve if Gazprom halts supplies due to the OMV decision, and the market will know within a week.
Tom Marzec-Manser, head of gas analysis at consultancy ICIS, tells the Financial Times that Gazprom customers typically pay for supplies on the 20th of the month. And he warned that “OMV may withhold this next payment, which would be around €213m. euros, but this could cause Gazprom’s contract to be terminated immediately.”
The announcement comes as colder weather sets in and annual demand for heating gas rises.
It notes that according to data from industry data provider Gas Infrastructure Europe, EU gas storages have had net withdrawals for 10 consecutive days, which is also boosting prices.
OMV’s natural gas commitments
OMV added that it will be able to fulfill contracts for energy delivery as it has already diversified from Russian gas. Austrian Energy Minister Leonore Gewessler also wrote on social networking site X that OMV’s actions “do not pose a direct threat to our security of supply”.
However, he warned: “It is clear that a sudden supply cut could cause tension in natural gas markets.”
What is happening in Moldova?
Meanwhile, the chairman of the board of the Russian-Moldovan gas distribution company Moldovagaz, Vadim Cheban, believes that Gazprom has every reason to stop supplies to Moldova after the country’s government failed to fulfill debt settlement agreements.
“It must be said that, contrary to the claims of some experts about the absence of reasons for the termination of the contract by Gazprom, this is not the case. The Russian side can terminate it at any time for commercial reasons. First of all, because of the unresolved issue of the debt, which is an integral part of the contract, and also because of force majeure conditions related to the conclusion of a new contract for transit through the territory of Ukraine,” Cheban said in an interview with the Moldovan newspaper Logos .
For its part, the management of the Russian natural gas company stated that it strongly disagrees with Moldova’s claims and intends to defend its rights. Moldova is experiencing an energy crisis due to rising gas and electricity prices, which has sparked protests.
As of October 2022, Gazprom, which was previously the sole supplier of natural gas to the republic, has reduced its daily supply by 30% due to problems with transit through Ukraine. In this situation, Moldova turned to buying natural gas from European suppliers, while Russian gas is sent to the unrecognized republic of Transnistria.
Moldovagaz was founded in 1999. Gazprom controls 50% of the shares, another 35.3% belongs to the government of Moldova and 13.44% to Transnistria, which transferred its shares to Gazprom.
Source: OT.GR
#Gazprom #gas #Austria #Energy #blackmail
1. Can you provide an overview of the current state of Russian gas supplies to Europe and the impact of this recent development on Austria’s energy sector?
2. How is the EU preparing for possible disruptions in natural gas supplies from Russia through Ukraine, and what measures are being taken to ensure energy security?
3. How is Austria working to diversify its energy sources, particularly in the area of natural gas, and what challenges does it face in doing so?
4. What are the potential implications of this situation for Slovakia, who also receives natural gas through the same pipeline as Austria?
5. How is the International Energy Agency and the European Commission responding to this issue, and what role do they see for themselves in mitigating potential energy crises?
6. Are there any concerns about the impact on energy markets and prices due to this development, and how is the industry preparing for potential market instability?
7. How significant is the transit agreement between Russia and Ukraine for Europe’s overall energy security, and what impact would its termination have on gas supplies?
8. What are some of the challenges facing Moldova in terms of its energy crisis and its reliance on Russian gas?
9. Do you see any potential for diplomatic resolution to these ongoing energy disputes between Russia and European countries, or is further escalation likely?
10. what advice would you give to individuals and families in Austria and Europe as they navigate potential energy price hikes and supply disruptions due to this situation?
