OMV earns $242 million from Gazprom over violation of contract.

Russia has ceased natural gas deliveries to Austria, its longest-standing EU customer, an event marking the abrupt end of a gas trade relationship that had lasted for over five decades, beginning with the USSR in 1968 and later transitioning to Russia.

Moscow’s decision to terminate unilaterally one of the few lucrative gas contracts in Europe will hurt Gazprom, its gas giant, and hit Russia’s capability to wage the war in Ukraine. For Austria, the halt of deliveries underscores a strategic shift towards alternative sources and removes much of geopolitical pressure on the government in Vienna.

More to read:
Russia-China gas pipeline is failing as Mongolia omits project from long-term plan

The roots of the crisis seem to be the legal victory of Austria’s energy company OMV on 14 November over Gazprom, the Kurier notes. The Stockholm Arbitration Court awarded OMV $242 million (excluding interest and court costs) for irregularities in gas supplies, culminating in a complete cessation of deliveries back in September 2022.

This supply disruption was part of a broader Kremlin strategy aimed at weaponizing energy to destabilize Europe during the winter.

Following the ruling, OMV chose to offset the awarded amount by withholding monthly payments to Gazprom for future gas deliveries. However, this strategic financial maneuver drew a swift and retaliatory response. On 15 October, Gazprom Export, a subsidiary of Gazprom, announced that it would terminate gas supplies under the existing contract. By 16 November, Austria’s gas taps from Russia were shut off.

Unlike the situation in earlier years, Austria was ready for this scenario. Chancellor Karl Nehammer reassured the nation that measures had been taken since the Russian invasion of Ukraine. He promised that no home would be in cold during the winter.

More to read:
After Power of Siberia-2, Russia now postpones Gazprom arctic gas projects

Austria’s readiness was the result of a deliberate strategy to diversify its energy sources and reduce dependence on Russian gas. Minister for Climate Action Leonore Gewessler echoed this sentiment, emphasizing that Russia’s unreliability had been evident since the onset of the conflict in Ukraine but now Moscow would be unable to blackmail Vienna.

The termination of gas supplies may have significant legal and strategic consequences. By halting deliveries unilaterally, Gazprom violated its contractual obligations, which were set to last until 2040. The move also dealt a blow to the Kremlin’s gas revenue stream, which has been a critical source of funding for its war in Ukraine.

It’s almost certain that OMV, which was a party to the agreement, would sue Gazprom over the delivery disruption.

***
NewsCafe is an independent outlet that cares about big issues.Our sources of income amount to ads and donations from readers. You can support us via PayPal: office[at]rudeana.com or paypal.me/newscafeeu. We promise to reward this gesture with more captivating and important topics.