Russia cuts gas to Austria in payment dispute, keeps EU flows

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By Vladimir Soldatkin and Guy Faulconbridge

MOSCOW (Reuters) -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 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 following an arbitration award to OMV, Austria’s biggest energy supplier, over unfulfilled supplies to its German unit by Russia’s state firm Gazprom.

On Saturday, Austria’s energy regulator E-Control said Gazprom’s deliveries to OMV had stopped at 6 a.m. (0500 GMT), adding that prices and supplies to Austrian customers were steady.

OMV is seeking to recover the 230 million euro ($242 million) damages, awarded during arbitration, from Gazprom by offsetting the claim against invoices for deliveries to Austria – essentially stopping some payments for gas supplied via Ukraine.

Gazprom declined to comment on the suspension of flows to Austria, but the Russian company said it would send 42.4 million cubic metres of gas to Europe via Ukraine on Saturday, the same volume as on Friday and during every other day in recent months.

Slovak state-owned firm SPP said it was still receiving gas from Russia and added others were buying more.

“The situation when a large consumer stopped taking gas from the east, but the same volume flows through the territory of Ukraine, shows that there is still great interest in this gas in Europe,” SPP said in a statement, without naming the other buyers.

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

Austrian grid operator AGGM said it was not currently substituting imports from Germany or Italy. Austria said earlier it had plentiful stocks to cover the shortfall.

GAS POLITICS

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 war started in 2022 Gazprom has lost market share to Norway, the United States and Qatar.

The Yamal-Europe pipeline via Belarus was closed after a dispute, while Russia blamed the United States and Britain for the 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.

($1 = 0.9487 euros)

(Reporting by Vladimir Soldatkin and Guy Faulconbridge in Moscow, Thomas Escritt in Berlin, Jason Hovet in Prague; Editing by Frances Kerry, Kirsten Donovan and David Holmes)