Exclusive: Russia’s Gazprom tells Europe it will stop controlling gas

A view shows a screen bearing the Gazprom logo at the Saint Petersburg International Economic Forum (SPIEF) in Saint Petersburg, Russia, June 17, 2022. REUTERS/Anton Vaganov/

LONDON (Reuters) – Russia’s Gazprom has told customers in Europe that it cannot guarantee gas supplies due to “extraordinary” conditions, according to a letter seen by Reuters, raising the stakes in an economic standoff with the West. Moscow’s invasion of Ukraine.

The July 14 letter from the Russian state gas monopoly stated that it was retroactively declaring the presence of force majeure on supplies dating back to June 14. The news comes as Nord Stream 1, the main pipeline that takes Russian gas to Germany and beyond, is undergoing annual maintenance that is supposed to end. Thursday. Read more

The letter heightened Europe’s fears that Moscow might keep the pipeline off in response to sanctions imposed on Russia over the war in Ukraine, fueling an energy crisis that threatens to push the region into recession.

Force majeure, otherwise known as the “act of God” clause, is standard force majeure in employment contracts and spells out the extreme circumstances that relieve a party from its legal obligations.

Gazprom (GAZP.MM) He did not respond to a request for comment.

Russian gas supplies have been declining via major routes for a few months now, including through Ukraine and Belarus as well as via Nord Stream 1 under the Baltic Sea.

A trade source, who asked not to be identified due to the sensitivity of the issue, said force majeure related to supplies via Nord Stream 1.

“This appears to be a first hint that gas supplies via NS1 may not resume after the 10-day maintenance work is over,” said Hans van Cleef, chief energy economist at ABN AMRO.

He added, “Depending on the ‘extraordinary’ circumstances that are being considered for the declaration of force majeure, and whether these issues are more technical or political, it may mean the next step in the escalation between Russia and Europe / Germany.”

Uniper, Germany’s largest importer of Russian gas, was among the customers who said they had received a letter, and that it formally dismissed the claim as unjustified.

RWE (REWEG.DE)Germany’s largest energy producer and another importer of Russian gas said it had received a force majeure notification.

“Please understand that we cannot comment on its details or our legal opinion,” the company said.

turbine delay

Gazprom cut pipeline capacity to 40% on June 14, citing delays to a turbine being maintained in Canada by equipment supplier Siemens Energy. (ENR1n.DE).

Kommersant newspaper quoted informed sources as saying that Canada sent the turbines of the pipeline to Germany by plane on July 17 after the repair work was completed.

It will take another five to seven days for the turbines to reach Russia, the report said, provided there are no problems with logistics and customs. The German Economy Ministry said on Monday it could not provide details on the location of the turbines.

But a ministry spokesman said it was a replacement part that was only supposed to be used from September, meaning its absence could not be the real reason for the drop in gas flows prior to maintenance.

Austrian oil and gas group OMV (OMVV.VI)However, on Monday, it said it expected to resume gas deliveries from Russia via the Nord Stream 1 pipeline as planned after the outage. Read more

“Gazprom’s motives are uncertain, but the announcement will not have a material impact on the current landscape,” said Zongqiang Lu, gas analyst at consultancy Rystad Energy.

The European Union, which has imposed sanctions on Moscow, aims to halt the use of Russian fossil fuels by 2027 but wants supplies to continue for now while developing alternative sources.

For Moscow and Gazprom, energy flows are a vital source of income as Western sanctions over Russia’s invasion of Ukraine, which the Kremlin calls a “special military operation,” have caused Russian financial strain.

According to the Russian Finance Ministry, the federal budget received 6.4 trillion rubles ($114.29 billion) in oil and gas sales in the first half of the year. This is compared to the 9.5 trillion rubles planned for the whole of 2022.

The grace period for payments on two of Gazprom’s international bonds expires on July 19, and if foreign creditors are not paid by then, the company will technically be in default.

(1 dollar = 56.0000 rubles)

(Reporting by Julia Payne) Additional reporting by Christoph Stitz in Frankfurt, Bosorg Sharafeddine in London Reporting by Nina Chestney in London; Editing by David Goodman, Edmund Blair and Barbara Lewis

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