Austria says Russia’s Gazprom will cut off natural gas supply this weekend

Author of the article:

The Associated Press

Stephanie Liechtenstein And David Mchugh

Published Nov 15, 2024  •  2 minute read

FILE - A worker sits on his water tank truck next to the business tower Lakhta Centre, the headquarters of Russian gas monopoly Gazprom in St. Petersburg, Russia, April 27, 2022. Photo by Dmitri Lovetsky /THE ASSOCIATED PRESS

VIENNA (AP) — Russia’s state-owned natural gas company Gazrom will cut off supplies to Austria’s OMV utility early Saturday, Austria’s chancellor said, adding that his country’s underground gas storage was full and that it had alternative, non-Russia supplies.

The cutoff follows OMV’s announcement that it would stop paying for Gazprom gas to its Austrian arm to offset a 230 million-euro ($242 million) arbitration award it won over an earlier cutoff of gas to its German subsidiary.

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Chancellor Karl Nehammer said Friday that Austria has a secure supply of alternative fuel and that “no one will freeze this winter, no home will be cold.”

“Our gas storage facilities are full and we have sufficient capacity to obtain gas from other regions,” Nehammer said in a hastily called appearance at the chancellery. “We cannot be blackmailed.”

OMV gave notice of the cutoff in a trading statement on the Central European Gas Hub website. An OMV spokesperson couldn’t be reached for comment. Gazprom had no immediate comment.

The cutoff will cost Gazprom around $2.5 billion a year in annual revenue, said Janis Kluge, an expert on the Russian economy at German Institute for International and Security Affairs. Oil and gas exports, and the associated tax revenues are the most important single source of cash for the Kremlin.

Russia cut off most natural gas supplies to Europe in 2022, citing disputes over payment in rubles, a move European leaders described as energy blackmail over their support for Ukraine against Russia’s invasion. The cutoff sent gas prices soaring and contributed to a sharp burst of inflation that went into double digits in October 2022, but has since subsided.

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European governments had to scramble to line up alternative supplies at higher prices, much of it liquefied natural gas brought by ship from the U.S. and Qatar.

Still, three European countries — Austria, Slovakia and Hungary _ have been getting supplies of Russian gas through a pipeline through Ukraine despite the fighting there. Ukraine has said it won’t continue gas transit past Jan. 1, leaving those countries looking for other supplies. Austria gets the bulk of its natural gas from Russia, as much as 98% in December 2023, according to Energy Minister Lenore Gewessler.

The European Union has ended most supplies of Russian oil, but hasn’t directly sanctioned Russian gas. Instead, it has set a nonbinding goal of 2027 for member countries to stop importing Russian gas.

In 1968, Austria became the first Western European country to import gas from the Soviet Union, and its dependence on Russian energy increased in the following decades. During a visit by Russia’s President Vladimir Putin to Austria in 2018, an agreement for the extension of natural gas supplies to Austria until 2040 was signed by Gazprom head Alexey Miller and Rainer Seele, then chairman of the OMV Executive Board. The contract obligates the Austrian side to pay for the gas whether it takes delivery or not.

Gewessler convened a commission to look into the circumstances under which it was signed and legal possibilities to get out of it.

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David McHugh reported from Frankfurt, Germany.

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