Austria's half-century relationship with Gazprom ends with gas confiscation!
The trigger that ended more than 50 years of gas flows from Russian state energy giant Gazprom to OMV earlier this month was the seizure of Russian gas by the Austrian group as payment to cover the value of an arbitration award, according to Reuters.
OMV, one of the few remaining buyers of Russian gas in Europe after Gazprom, lost almost all of its customers there in the wake of Russia's invasion of Ukraine in 2022. Before the start of the war, Russia was the single largest supplier of Europe of natural gas.
On November 13, OMV said it had won an arbitration case in Germany against Gazprom for 230 million euros ($239 million) related to irregular supplies to its German unit and would take steps to immediately enforce it against Gazprom's invoices. . Three days later, Gazprom suspended gas supplies to the Austrian company.
According to three sources close to Gazprom and OMV, the Austrian firm had confiscated 230 million euros of gas supplies for the month of October. It was the first time a European Union customer had not paid for Gazprom's gas, one of the sources close to Gazprom said.
A source close to OMV said it saw taking Gazprom's October gas supplies in lieu of the arbitration ruling as the last chance to do so if Ukraine, which plans to end a deal allowing Russian gas to flow to its territory next year, stops Russian gas flows. in January. Gazprom considers the confiscation of gas as non-payment and therefore stopped supplies.
OMV had been buying Soviet and Russian gas since 1968 and the events signaled that the Austrian firm is looking for ways to exit Russian gas purchases entirely, despite its contracts with Gazprom until 2040. Last week's supply cut gives OMV an opportunity to argue that Gazprom has breached the contracts. The sequestration of gas by OMV and the consequent non-payment of gas supplies to Russia in October have not been previously reported.
The sudden end of Gazprom and OMV's relationship surprised many gas market insiders and is a blow to Gazprom's long-standing economic and political influence in Central Europe. Austria has been one of Gazprom's most loyal customers, remaining almost entirely dependent on Russian gas even as other EU members switched to imports from Norway, the US and Qatar in 2022.
OMV's contracts with Gazprom include a "take or pay" clause, which says it must pay for the gas supplied even if it does not receive it. According to a second source close to Gazprom, Austria's large gas storage facilities have made it a stronghold for Gazprom in Central Europe over the past two decades. The source added that Austria had saved billions on cheap Russian gas after the start of the war in Ukraine.
Austria had received Russian gas at $300-$400 per 1,000 cubic meters when spot prices were trading above $1,000 per 1,000 cubic meters at the peak of Russian supply cuts to Europe in 2022. OMV CEO Alfred Stern has said that Gazprom's prices were in line with market prices. Despite Gazprom cutting off supplies to OMV, Austria has continued to receive Russian gas via Slovakia, a Reuters review of regional gas flows has shown.
Gazprom has sold more gas to Slovakia's SPP since it stopped sales to OMV. SPP then resold the gas to Austrian buyers, three of the five sources said. Resales have not been previously reported. Gazprom and SPP declined to comment. OMV declined to say whether it was buying gas from Gazprom indirectly through this arrangement.
OMV's Stern had planned to cut dependence on Russian gas after taking the role in 2021. In addition to the action over irregular supplies in Germany, OMV has launched several other arbitration cases against Gazprom, repaying 2.46 billion euros of Russian investments after Moscow seized shares that had in a Siberian Yuzhno Russkoye gas field.
Austria, whose government owns 31.5% of OMV, is politically neutral but supports sanctions against Russia. Its Chancellor Karl Nehammer was the first Western leader to visit Russian President Vladimir Putin after the invasion. Last year, its foreign minister Alexander Schallenberg said that a complete disengagement from Russia was illusory.
Relations have been strained recently, however. Austria's Raiffeisen Bank, the largest Western bank in Russia, had its local Russian unit frozen by a Russian court in a separate row with tycoon Oleg Deripaska. Raiffeisen has about 5 billion euros blocked in Russia.
On the day Gazprom cut off gas supplies to OMV, Nehammer accused Moscow of using energy as a weapon. Nehammer has remained in charge of a caretaker government since September's general election won by the Russia-friendly Freedom Party (FPO). But with around 29% of the vote, the FPO would need a coalition partner to command a majority in parliament and form a government.
With no potential coalition partner, Nehammer has been tasked with forming a government instead and is negotiating with other parties to form a new coalition that would exclude the FPO. Austrian Energy Minister Leonore Gewessler said it is up to OMV to decide whether to withdraw from contracts with Gazprom.
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