LONDON –
Russia’s Gazprom has told customers in Europe it cannot guarantee gas supplies due to “extraordinary” circumstances, according to a letter seen by Reuters, raising the stakes in an economic tit-for-tat with the West over Russia’s invasion of Ukraine. from Moscow.
The July 14 letter from the Russian state gas monopoly said it was retroactively declaring force majeure on supplies dating back to June 14. Thursday.
The letter added to fears in Europe that Moscow could keep the pipeline suspended in retaliation for sanctions imposed on Russia over the war in Ukraine, escalating an energy crisis that risks tipping the region into recession.
Known as an ‘act of God’ clause, force majeure is standard in commercial contracts and spells out extreme circumstances that relieve a party of its legal obligations.
Gazprom did not respond to a request for comment.
Russian gas supplies have been declining through major routes for some months now, including through Ukraine and Belarus, as well as through Nord Stream 1 under the Baltic Sea.
A business source, who asked not to be identified due to the sensitivity of the issue, said the force majeure concerned supplies via Nord Stream 1.
“This sounds like a first indication that gas supply via NS1 may not resume after the 10-day maintenance ends,” said Hans van Cleef, senior energy economist at ABN Amro.
“Depending on what ‘extraordinary’ circumstances are in mind to declare force majeure, and whether these issues are technical or more political, it could mean the next step in the escalation between Russia and Europe/Germany,” he added.
Uniper, Germany’s largest importer of Russian gas, was one of the customers who said they had received a letter and had formally rejected the claim as unjustified.
RWE, Germany’s biggest power producer and another Russian gas importer, also said it received a force majeure notice.
“Please understand that we cannot comment on its details or our legal opinion,” the company said.
TURBINE DELAY
Gazprom cut the pipeline’s capacity to 40% on June 14, citing the delay in maintenance of a turbine in Canada by equipment supplier Siemens Energy.
Canada shipped the turbine for the pipeline to Germany by plane on July 17 after repair work was completed, the Kommersant newspaper reported on Monday, citing people familiar with the situation.
The turbine will take between five and seven days to arrive in Russia, according to the report, provided there are no problems with logistics and customs. Germany’s economy ministry said on Monday it could not provide details on the whereabouts of the turbine.
However, a ministry spokesman said it was a spare part that was intended to be used only from September, meaning its absence could not be the real reason for the drop in gas flows before maintenance. .
However, Austrian oil and gas group OMV said on Monday it expected gas deliveries from Russia via the Nord Stream 1 pipeline to resume as planned after the disruption.
“Gazprom’s motivations are uncertain, but the statement will not have a material impact on the current outlook,” said Zongqiang Luo, a gas analyst at consultancy Rystad Energy.
The European Union, which has imposed sanctions on Moscow, aims to stop using Russian fossil fuels by 2027 but wants supplies to continue for now while it develops alternative sources.
For Moscow and Gazprom, energy flows are a vital source of revenue as Western sanctions over Russia’s invasion of Ukraine, which the Kremlin calls a “special military operation,” have strained Russian finances.
According to the Russian Ministry of Finance, the federal budget received 6.4 trillion rubles (114.29 billion US dollars) from oil and gas sales in the first half of the year. This compares with 9.5 trillion rubles forecast for all of 2022.
The grace period for payments on two of Gazprom’s international bonds expires on July 19, and if foreign creditors don’t receive payment by then, the company will technically be in default.
(Reporting by Julia Payne; additional reporting by Christoph Steitz in Frankfurt, Bozorg Sharafedin in London, writing by Nina Chestney in London; Editing by David Goodman, Edmund Blair and Barbara Lewis)