Russia’s Gazprom to stop supplying gas to Austria in contract dispute

As of Saturday morning it was unclear whether Russia had turned off its gas supplies to Austria or not.

Austria was one of the first Western countries to import gas from the then Soviet Union in 1968 with the Baumgarten hub near the border with Slovakia handling deliveries via Ukraine.

On Friday evening, Chancellor Karl Nehammer tried to reassure Austrians that there would be little impact this winter as Austria’s gas storage facilities were 93% full.

“We will not be blackmailed by anyone. Not even from the Russian president. We will not be brought to our knees by Putin’s government, by Putin himself, but have taken precautions to ensure that we can defend ourselves for precisely this reason,” he said in Vienna.

Austria’s biggest energy supplier OMV announced the stoppage on Friday evening, saying that whilst the end of gas supplies from Russia after more than 50 years had been expected, the flow was being switched off sooner than expected.

It comes after OMV won an arbitration award against Gazprom Export, for its irregular German gas supplies, which stopped entirely back in September 2022. 

The International Chamber of Commerce awarded OMV €230 million plus interest for missed gas deliveries which OMV said it would recover by suspending payments to Gazprom.

Ukraine has said it will not extend the transit agreement with Gazprom beyond January 2025 in a bid to choke off a source of income that Kyiv says Russia uses to fund its war.

On Friday evening, Chancellor Karl Nehammer assured Austrians there would be little impact and that the country had made preparations for such an event.

Cold War supplies

Austrian gas imports from Russia date back to the Cold War. Austria was one of the first Western countries to import gas from the then Soviet Union in 1968 with the Baumgarten hub near the border with Slovakia handling deliveries via Ukraine.

But that relationship was due to come to an end early next year anyway with the expiration of the contract between Gazprom and OMV.

In the face of rising uncertainty around Russian gas supplies to Europe, Austria has also increased efforts to secure supply from other countries, such as Turkey and Norway.

“In terms of security of supply, it’s not really a problem. We have enough gas in storage and there are enough other gas sources. This means that there will be no shortage, even if the winter gets very cold. But we are already seeing a price consequence,” said Walter Boltz, a former board member of Austria’s electricity and natural gas markets regulator, E-Control.

Moscow’s stoppage of gas to Austria, means significant gas volumes are now only flowing to Hungary and Slovakia.

Prior to the 2022 invasion of Ukraine, Russia supplied the EU with around 40% of its gas needs.

Despite a huge drop in supply since the Kremlin began its all-out war on Ukraine, the EU still relies on Russia for almost a fifth of its gas supplies and Energy Commissioner Kadri Simson demurred when asked whether the bloc was ready to include it in an ever expanding sanctions regime.

“We remain fully committed to completing the phase out of Russian gas, which can be done without challenging Europe’s energy security of supply,” Simson told reporters in Brussels last week as she unveiled the annual State of the EU Energy Union report.

It recognises that although consumption of Russian gas has fallen dramatically from the 150 billion cubic metres, or 45% of all imports before the invasion, the country still relied on Russia for 18% of imports in the eight months to August – slightly more than total LNG imports from the US, meaning Russia is still Europe’s second largest supplier after Norway.