Austria Braces for End of Six Decades of Russian Gas Dependence

Austria is preparing for Moscow to turn off the taps that kept Russian gas flowing for more than a half century, as OMV AG enforces a ruling against Gazprom PJSC.

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Bloomberg News

Jonathan Tirone and Marton Eder

Published Nov 14, 2024  •  2 minute read

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(Bloomberg) — Austria is preparing for Moscow to turn off the taps that kept Russian gas flowing for more than a half century, as OMV AG enforces a ruling against Gazprom PJSC. 

Russian gas has powered Austrian industry and homes for some 56 years, but the energy crisis that ensued when Moscow cut supplies to Europe meant “there was too much risk and too much uncertainty” connected with OMV’s long-term contract with Gazprom, Chief Executive Officer Alfred Stern said Thursday in an interview. 

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“We can no longer rely exclusively on Gazprom,” he said. 

OMV’s 59-year-old CEO said that while his company is ready to comply with its contractual obligations to Gazprom, there’s a growing probability that Russia will cut flows once Austria enforces its €230 million ($242 million) arbitration claim by witholding payments for gas. 

“It’s known to Gazprom now that this is what we will do,” Stern said, adding that the Russian gas giant could act before, or when the payment is due, or even do nothing. “We are prepared for all eventualities.”

The CEO declined to give further details of OMV’s contract with Gazprom, including confirmation of when the next monthly payment is due.

Europe’s gas market has been particularly sensitive to disruptions since the 2022 energy crisis, with any outages liable to jolt prices. Futures have climbed in recent months on gathering risks to supply, and the threat of an imminent Russian cutoff increases the strain just as the heating season gets under way.

Much of the region has weaned itself off Moscow’s gas in recent years, with Austria — OMV’s home market — Hungary and Slovakia the biggest remaining importers of fuel. While Gazprom has also been involved in arbitration with other European clients, such as Uniper SE and Eni SpA, this is the first time a company has said it could divert its payments to recover arbitration awards.

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“We have a very clear strategy that we have executed in a very focused and consequent way,” Stern said. “I think we are one of the few companies that will actually be able to collect some of the money from the arbitration award.”

Austria has maintained one of Europe’s oldest and deepest connections to Russian energy, and in 2018 extended a long-term gas contract to 2040. State-owned OMV, the country’s biggest fossil-fuel company, grew out of its post-World War II independence treaty that handed over Soviet-controlled energy assets in return for the nation’s neutrality.

OMV said it can meet supply obligations through 2025 and beyond via alternative sources in the event that Russian deliveries under its long-term contract are halted. The company is producing from its own assets in Norway and buying more LNG, Stern said. 

“We have alternative sources that we didn’t have before,” Stern said. “Before, we depended solely on supply from Gazprom. This is no longer the case and with this, the dependence is gone.”

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