Russia Cuts Gas Supply to Austria Amid Payment Dispute, Continues Deliveries To Europe via Ukraine

Russia halted gas supplies to Austria on Saturday in a dispute over payments but was still pumping steady volumes to Europe via Ukraine after remaining buyers asked for more gas.

Russia, which before the Ukraine war was the biggest single supplier of natural gas to Europe, has lost almost all of its European customers as the EU tries to reduce its dependence and after the Nord Stream pipeline to Germany was blown up in 2022.

Now one of the last main Russian gas routes to Europe the Soviet-era Urengoy-Pomary-Uzhgorod pipeline via Ukraine is due to shut down at the end of this year as Kyiv does not want to extend a five-year transit agreement which brings northern Siberian gas to Slovakia, the Czech Republic and Austria.

Austria said on Friday that Moscow had informed it that the gas would be shut off from Saturday following an arbitration award to OMV, Austria’s biggest energy supplier, over unfulfilled Gazprom supplies to its German unit.

On Saturday, Austria’s energy regulator E-Control said Gazprom’s deliveries to OMV had stopped at 6 a.m. local time (0600 WAT), adding that prices and supplies to Austrian customers were steady.

OMV is seeking to recover the 230 million euro damages awarded during arbitration from Gazprom by off-setting the claim against invoices for deliveries to Austria essentially stopping some payment for gas supplied via Ukraine.

Gazprom said it would send 42.4 million cubic metres of gas to Europe via Ukraine on Saturday, the same volume as on Friday.

Flows into Slovakia from Ukraine were stable but nominations for flows to Austria from Slovakia were around 16% below averages seen this month, data from transmission system operator Eustream showed.

OMV usually accounts for around 40% of Russian gas flows via Ukraine, or some 17 mcm per day.

Chancellor Olaf Scholz spoke to President Vladimir Putin on Friday for the first time in nearly two years, as European leaders wait to hear Donald Trump’s ideas on ending the biggest land war in Europe since World War Two.

According to the Kremlin, Putin told Scholz that Russia had always fulfilled its contractual obligations for energy supplies and was “ready for mutually beneficial cooperation if the German side shows interest in this.”

Soviet and post-Soviet leaders spent half a century from the discovery of major Siberian gas deposits in the post-WW2 years building up an energy business which linked the Soviet Union, then Russia, and Germany, by far Europe’s biggest economy.

War, and explosions, have destroyed that link, damaging the economies of both countries.

At its peak, Russia was supplying 35% of Europe’s gas but since the 2022 war, Gazprom’s market share has been lost to Norway, the United States and Qatar.

The Yamal-Europe pipeline via Belarus was closed down after a dispute while Russia blamed the United States and Britain for the mysterious explosions under the Baltic Sea that closed the Nord Stream route.

Washington and London have denied they blew up the pipelines. The Wall Street Journal has reported Ukrainian officials were behind the attack. Kyiv has denied that.

Without Austria, significant Russian supplies will only go to two European countries Hungary and Slovakia, in Hungary’s case via a pipeline running mostly through Turkey.

Russia shipped some 15 billion cubic metres of gas via Ukraine in 2023, about 8% of peak Russian gas flows to Europe via various routes in 2018-2019, according to data compiled by Reuters.

In 2023, the Ukraine transit route met 65% of gas demand in Austria and its eastern neighbours Hungary and Slovakia, according to the International Energy Agency.

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