Austria's OMV Utility Faces Gazprom Natural Gas Supply Cutoff This Weekend

Russia's state-owned gas company, Gazprom, will halt supplies to Austria's OMV utility on Saturday, according to Austria's Chancellor. Despite this, Austria's underground gas storage is full, and the country has secured alternative non-Russian sources. This move follows OMV's decision to stop payments for Gazprom gas to its Austrian branch after winning a €230 million ($242 million) arbitration award over a previous cutoff to its German subsidiary.

Chancellor Karl Nehammer assured that Austria has sufficient alternative fuel supplies, stating, "No one will freeze this winter, no home will be cold." He emphasized that Austria's gas storage facilities are full and capable of sourcing gas from other regions. "We cannot be blackmailed," Nehammer declared during an urgent appearance at the chancellery.

Impact on Gazprom and European Gas Supply

The cutoff is expected to cost Gazprom approximately $2.5 billion annually in revenue, according to Janis Kluge from the German Institute for International and Security Affairs. Oil and gas exports are crucial for the Kremlin's finances. In 2022, Russia reduced most natural gas supplies to Europe, citing payment disputes in rubles. European leaders viewed this as energy blackmail due to their support for Ukraine against Russia's invasion.

This reduction led to soaring gas prices and inflation reaching double digits in October 2022, although it has since decreased. European governments scrambled to secure alternative supplies at higher costs, primarily liquefied natural gas from the US and Qatar. Despite the conflict in Ukraine, Austria, Slovakia, and Hungary continued receiving Russian gas through a pipeline via Ukraine.

Austria's Energy Dependence and Future Plans

Austria relies heavily on Russian natural gas, with up to 98% sourced from Russia as of December 2023, according to Energy Minister Leonore Gewessler. The European Union has ceased most Russian oil imports but hasn't directly sanctioned Russian gas. Instead, it aims for member countries to stop importing Russian gas by 2027.

Austria was the first Western European nation to import Soviet Union gas in 1968, increasing its reliance on Russian energy over the decades. In 2018, during President Vladimir Putin's visit to Austria, Gazprom head Alexey Miller and OMV Executive Board Chairman Rainer Seele signed an agreement extending natural gas supplies until 2040. This contract requires Austria to pay for the gas regardless of delivery.

Gewessler has convened a commission to investigate the contract's circumstances and explore legal options for termination. Meanwhile, Ukraine has announced it will cease gas transit past January 1st, prompting affected countries like Austria to seek alternative sources.