Russia Cuts Gas Supplies to Austria Amid Payment Dispute

Russia’s state-owned natural gas company Gazprom is turning off its supply to Austria after Austria said it wouldn’t pay anymore until it had received 230 million euros worth of gas, following an arbitration ruling with Austria's energy company OMV who is owed this sum from a dispute.

Russia’s state-owned energy company Gazprom will halt natural gas deliveries to Austria’s OMV utility starting early Saturday, according to Austrian Chancellor Karl Nehammer. He says that Austria’s underground gas storage is full and the country has secured alternative, non-Russian supplies.

The cutoff follows OMV’s decision to stop payments to Gazprom for gas supplied to its Austrian division. This decision was made to offset a €230 million ($242 million) arbitration award OMV won after Gazprom cut gas deliveries to its German subsidiary.

Chancellor Nehammer, speaking at a press conference Friday, emphasized that Austria’s energy security is intact.

“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. We cannot be blackmailed,” he declared.

OMV announced the supply halt via a statement on the Central European Gas Hub website but declined further comment. Gazprom also has not responded.

Russia significantly reduced gas supplies to Europe in 2022, citing payment disputes. Gazprom had asked for payments to be in rubles. European leaders labeled this move as energy blackmail due to their support for Ukraine amidst Russia’s invasion. The supply cuts led to skyrocketing gas prices and record-high inflation, which peaked in October 2022 but has since eased.

European countries scrambled to secure alternative supplies, including liquefied natural gas (LNG) from the U.S. and Qatar. However, Austria, Slovakia, and Hungary continue to receive Russian gas through a pipeline running via Ukraine. Ukraine has announced it will cease gas transit after January 1, 2025, leaving these countries to seek new suppliers.

Austria’s dependency on Russian gas remains high, accounting for as much as 98% of imports in December 2023, according to Energy Minister Leonore Gewessler. While the European Union has largely ended imports of Russian oil, it has not directly sanctioned Russian gas. The EU aims to phase out Russian gas imports by 2027 as part of its nonbinding targets.

Austria has a long history of reliance on Russian gas, dating back to 1968 when it became the first Western European country to import gas from the Soviet Union. In 2018, a deal extending gas supplies until 2040 was signed during Russian President Vladimir Putin’s visit to Austria. The contract obligates OMV to pay for the gas whether it is delivered or not.

Minister Gewessler has initiated a commission to review the circumstances surrounding the contract and explore legal options for termination.

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