Gazprom Faces More Claims After Austrian Utility Halts Payment
(Bloomberg) — The decision by an Austrian utility to stop paying for supplies from Gazprom PJSC may set a precedent for others to follow as Europe looks to cut its dependence on the Russian gas giant.
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Gazprom responded by halting supplies to Austria’s OMV AG highlighting the serious consequences. Lawyers say the precedent could open the floodgates to similar action by other firms as pending cases move through international courts.
Companies from Italy’s Eni SpA to RWE AG in Germany, say they are owed compensation for the cost to replace supplies when Gazprom stopped delivering some gas in 2022.
“Several cases are pending, with more awards expected in the coming months,” said Agnieszka Ason, an energy lawyer and visiting research fellow at the Oxford Institute for Energy Studies. “If more damages are awarded to European importers — and this will likely be the case — and at least some awards can be enforced, this will put a lot of pressure on Gazprom’s financial position,” she said.
The possibility of more gas cut offs is yet another reason for traders to doubt that Russian flows will continue to Europe for much longer. Also in the mix are US sanctions on Gazprombank, used by European firms to pay for gas, and uncertainty over flows through Ukraine when the transit deal ends at the end of the year.
Companies seeking compensation from Gazprom are unlikely to get a cash payment from the Russian gas giant and, like OMV, may need to work out alternative ways to get paid back.
OMV stopped paying for gas it was receiving from Russia through Ukraine but that prompted Gazprom to cut supplies almost immediately. Given this example, other companies deciding not to pay, need to be sure they’ve got alternative supplies to survive without Gazprom.
For the Russian company, cutting off a customer means losing another foothold in Europe.
Gas is one of the only valuable assets that Gazprom still has in Europe. The company’s international assets shrank following the nationalization of Gazprom Germania at height of the energy crisis. Arbitration awards are granted on a first come, first served basis and in Europe, unlike the US, they do not have an expiration period.
Uniper SE, one of the former Gazprom partners most severely hit by a slump in supplies, won more than €13 billion in damages for Russian gas volumes not supplied since mid-2022. The international arbitration ruling allowed it to terminate Russian supply contracts, some of which ran until the middle of the next decade.
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