Espreso. Global

Austria announces intentions to terminate gas supplies contract with Russia

13 February, 2024 Tuesday
12:40

Austria is considering the option of terminating the multi-year contract between the energy company OMV and Russia's Gazprom for gas supplies to the country

The Austrian Minister for Climate Protection, Environment, Energy, Mobility, Innovation and Technology, Leonore Gewessler, revealed the information.

"Our dependence on Russian natural gas threatens the prosperity, security and future of our country. Our goal is to get rid of Russian natural gas. As a sovereign country, we cannot simply accept the fact that the share of Russian gas is increasing, not decreasing," the minister said.

The statement notes that over the past decades, Austria has become "highly dependent on Russian gas supplies." The last significant step towards this dependence was the extension of long-term contracts for the supply of natural gas from Russia in 2018.

"These wrong decisions led to the fact that at the beginning of the Russian aggression, Austria was already receiving 80% of its gas from Russia," the ministry said.

Despite the federal government's measures to reduce this dependence, the share of Russian natural gas in Austria is still "too high," and in recent months it has been growing. According to the Ministry of Energy, one of the reasons for this is that the natural gas supply contracts concluded by Austrian OMV with Gazprom provide for a fixed obligation to purchase gas (take-or-pay). In view of this, these contracts have been called "bonded."

"This means that payment must be made in any case, even if Russian gas is not purchased. As a result of these bonded contracts, against the backdrop of falling overall gas consumption and unchanged imports, the share of Russian natural gas is growing. After all, gas consumption in Austria decreased by a quarter from 100.3 terawatt-hours in 2021 to 75.6 terawatt-hours in 2023," the ministry said.

According to Gewessler, there is a clear market failure, as "there is enough non-Russian natural gas, but energy companies are not buying it."

"If the market is not working, the state must intervene. I am convinced of this: It is time for a legislative commitment to diversification. And I also appeal to all those responsible in the parliament - let's take the next step now," she said.

The Ministry of Energy has put forth several measures that require legislative endorsement by a constitutional majority. Specifically, these proposals revolve around the mandate for energy companies supplying gas to Austrian consumers to possess the capability "to replace the failure of the largest single source of supply with other sources of supply."

In addition, gas suppliers "must provide evidence of a gradual increase in the share of non-Russian natural gas". Another measure mentioned was "preparations for withdrawal from Russian contracts.”

"Another reason for the high level of dependence is the bondage agreement between OMV and Gazprom, which provides for fixed obligations to purchase Russian gas. In order to refuse to supply Russian gas, as is envisaged in Austria and at the EU level, it is necessary to study and implement all options for terminating the contract," the Energy Ministry said.

Gazprom has already unilaterally reduced gas supplies in 2022, and "with the expiration of the transit contract through Ukraine, there is again a risk that Russia will use gas supplies as a weapon and will not supply as much as planned."

"For this reason, the Ministry of Climate Protection supports any possibility of withdrawing from the gas supply contract due to Gazprom's unilateral failure to fulfill its obligations," the statement said.

  • Earlier, the Austrian manufacturer of heating boilers Windhager filed for bankruptcy amid rising energy prices due to Russia's war against Ukraine.

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